Alcaraz extended his career-best winning streak to 17 matches in a semi-final played in sweltering conditions at the Wimbledon warm-up event in West London.
The five-time Grand Slam champion hit 36 winners and 15 aces to dispatch his fellow Spaniard in 90 minutes.
Top-seeded Alcaraz will face Jiri Lehecka in Sunday's final after the Czech world number 30's shock 6-4, 4-6, 7-5 win against British star Jack Draper in the other semi-final.
Playing his first tournament since his epic French Open victory against Jannik Sinner two weeks ago, the 22-year-old is through to his fifth successive final after lifting titles on clay in Paris, Rome, Barcelona and Monte Carlo.
Alcaraz signalled his emergence as a grass-court force by winning Queen's in 2023, clinching the Wimbledon title for the first time just weeks later and defending his All England Club crown last year.
He is one victory away from becoming only the second Spaniard to win Queen's twice, after Feliciano Lopez's victories in 2017 and 2019.
"I'm playing great tennis. After every match, I'm feeling more comfortable. Making the final here is so special once again," Alcaraz said.
"I love making the crowds enjoy watching my games. Whenever I put a smile on my face, I play my best tennis.
"I try to have fun and bring joy on the court. That is why I'm getting good results."
Alcaraz wasted little time taking control against Bautista-Agut, unfurling a deft drop-shot to break in the third game of the match.
That was all the encouragement Alcaraz needed as he held serve with ease to close out the first set.
Bautista-Agut, 37, enjoyed a surprise win over Danish fourth seed Holger Rune in the last eight.
But Alcaraz never looked like suffering the same fate, and he delivered the knockout blow in the second set.
A whipped forehand down the line earned a break-point that he converted to move 3-2 ahead.
The nerveless Alcaraz finished off the win in typically ruthless fashion to the delight of the fans waving Spanish flags to salute their hero.