Hosts Saarbruecken were bidding to become the first third-division club to lift the trophy in the competition's history, but came up short after goalkeeper Tim Schreiber's costly error.
Saarbruecken had already knocked Bayern Munich, Eintracht Frankfurt and Borussia Moenchengladbach out of the cup, but came unstuck against fallen giants Kaiserslautern.
"That hurts so much," Saarbruecken coach Ruediger Ziehl told ARD.
"We didn't have to lose that game. We paid for one mistake."
The Bundesliga 2 team will face either Xabi Alonso's unbeaten Bayer Leverkusen or Fortuna Duesseldorf in the final in Berlin on May 25 as they bid to win the title for a third time.
The last second-tier club to reach the final was Duisburg 13 years ago, when they lost 5-0 to Schalke.
"We didn't allow them to counter against us. That's how Bayern Munich failed here, that's how Borussia Moenchengladbach failed here," said Kaiserslautern boss Friedhelm Funkel.
The best chance of a cagey first half saw Kai Brunker head narrowly wide for Saarbruecken shortly before the break.
But the visitors struck first eight minutes into the second period, as Marlon Ritter's near-post header from an Almamy Toure cross was allowed to bounce through his legs by Schreiber.
Saarbruecken's cup final dream was all but ended with 15 minutes to play as former Monaco full-back Toure turned goalscorer, climbing highest to nod Tymoteusz Puchacz's away-swinging free-kick into the bottom corner.
Brunker went close again for Saarbruecken late on, but they could not set up an exciting finish.
