Hosts Australia had the upper hand against China without crafting the breakthrough, until 35-year-old Cahill pulled out a stunning bicycle-kick just after half-time.
The latest uber-strike from Cahill, whose World Cup volley against the Netherlands was short-listed for goal of the year, was followed by a trademark header for the 2-0 win.
Australia's victory ended an encouraging tournament from China, who won all three group games for the first time to end their 11-year absence from the knock-out stages.
The Socceroos will now face either Japan or UAE at Newcastle's modest Hunter Stadium, the smallest of the Asian Cup venues, on January 27.
"This is a big win for us, it's something that I knew deep down was going to happen before the game, because I believe in this team," said Cahill.
"I had to wait for my chance and I took two of them out of three and I'm pretty happy."
The Socceroos deserved the win against a willing but outgunned Chinese side, who scrambled well in the first half but folded under the weight of possession enjoyed by the Australians.
After Cahill's goals, China refused to concede and they forced two diving saves from Australian keeper Mathew Ryan, but ultimately paid for their lack of fire-power.