Cerundolo will face American eighth seed Tommy Paul in Sunday's decider after he beat Frenchman Ugo Humbert 6-3, 6-3.
"I'm super happy because it's my first final in an ATP 500," Cerundolo said on court at the end of the match.
The pair went toe to toe on the grass of the Wimbledon warm-up in the first set before the 24-year-old Nakashima got the edge in the tiebreak, taking it 7-5.
The 27-year-old Argentine hit back in the second, breaking to go up 4-3 and picking up the next two games to square the match.
The decider went with break until Cerundolo produced a perfect cross-court forehand that left Nakashima swishing at air.
The break put him 3-2 up but he couldn't retain the advantage with the American, now coached by former world no.6 Wayne Ferreira who won at Queen's in 1992, breaking straight back.
Cerundolo, who won a grass title at Eastbourne in 2023, broke again to go 5-4 up and duly served out for the match.
"It was a really challenging match, really tough," said Cerundolo. "I think Brandon is playing incredible too. He was playing amazing during the whole weekend today also.
"I'm super happy because I just stayed there competing."
Paul, a Queen's champion in 2024, continued his impressive form this week against Humbert, having not dropped a set in west London.
The 29-year-old will seek to claim his second trophy of the season, after lifting the clay-court title in Houston, when he meets Cerundolo in Sunday's final.
Cerundolo boasts a 5-2 lead over Paul in their previous career meetings, including a three-sets victory over the American in the round of 32 at Queen's three years ago.