An inside out forehand down the line from Osaka would end the set.
Osaka broke serve to lead set two 1-0 before reaching 30 all on her serve.
The Japanese player then struck a 120 miles per hour ace down the tee to reach 40-30 before striking an ace out wide to hold serve and lead 2-0.
Both players then held their following service games with Osaka serving ahead 4-3.
Osaka netted a down the line forehand then struck two consecutive double faults to trail 0-40.
Osaka then reached 30-40 following two Williams' groundstrokes which landed long.
On the following breakpoint, Osaka took a big risk as she attempted a down the tee second serve which landed wide to result in her eighth doublefault of the day as Williams broke serve to pull even at four games all.
However Williams soon found herself trailing on her own serve 0-40 after striking a doublefault to follow two backhand winners from Osaka.
The third seed then pounded a crosscourt backhand winner to break the American's final service game and take a 5-4 lead.
Serving for the match, Osaka struck an ace to lead 15-0.
Williams then hit two crosscourt forehand returns wide to trail 0-40 and face three matchpoints.
The American netted a crosscourt backhand to end the semifinal encounter.
Williams, who has won a career total of 23 singles grand slam titles was attempting to tie the Australian Margaret Court's record of 24 singles grand slam championships.
However the American will now look to this year's championships at Roland Garros, Wimbledon and the US Open to cement her status as the greatest female tennis player ever.
For Osaka, it was her twentieth match win in a row in the semifinal encounter.
In her following press conference, Williams appeared somewhat annoyed and cut the event short as she left in tears.