Seven-times champion Williams had been bidding to claim a record-equaling 24th Grand Slam crown but made too many errors as Kerber ran out a comfortable victor in the final.
Williams is 23-6 in Grand Slam finals, and Kerber is responsible for handing her one of those rare defeats, at the 2016 Australian Open.
Williams admitted this time may be more hard, not least because she gave birth just 10 months ago, and has spoken about the tough delivery, which left her in hospital for six weeks.
7-time champion Serena had reached the final and been declared the favourite despite just returning from birthing her child in September.
Kerber is seeking to add a first Wimbledon title to her Australian and U.S. Open victories, which both came in 2016.
The 30-year-old looked incredibly confident throughout as she repeatedly thwarted Williams' attempts to seize control of the match.
On Saturday, Williams was supported by several celebrity friends at Centre Court. Not many players can do that so it showed that she really can be at her best in the biggest matches. Play will begin at 1 p.m. local time, with the women's final to follow. It was the second longest semifinal in Wimbledon history, trailing only Kevin Anderson's victory over John Isner on Friday.
Novak Djokovic faces Kevin Anderson in the men's final with both men sure to be feeling worn out after extended, energy-sapping clashes.
Kerber said of her win: "It's just a dream come true". By the time the first set was over, the disparity was 14-3.
Nadal and Djokovic were forced to start their match an hour before the women's final, which inevitably resulted in the match starting around two hours late.
The victor will face Kevin Anderson in Sunday's final. Terrific playing from two legends of the court.
Kerber stuck with her tactics in the second set, breaking in the sixth, and the sight of Williams falling to the ground in frustration when she missed a straightforward lob for 30-0 when Kerber was serving for the match summed up her day. She wore special compression leggings as a precaution during Wimbledon, just the fourth tournament of her comeback.
Kerber, born to a German father and Polish mother, was also quick to acknowledge the influence of Graf, who won 22 Grand Slam singles titles including seven at Wimbledon. She knew exactly what to expect - and what to do - against Serena Williams. 'Everything was faster. For Venus, it was a big advantage past year.
The moment Angelique Kerber won.