In scenes reminiscent of their 2010 triumph in the same arena, world number one Djokovic beat big-serving Milos Raonic 7-6(1) 6-2 6-2 before Tipsarevic kept his nerve to beat Vasek Pospisil 7-6(3) 6-2 7-6(6) in the deciding singles. (Agencies)
Serbia's 3-2 win means they can now look forward to a home final against the Czech Republic but it was heartbreak for Canada who were looking to reach the final for the first time.
Djokovic was ruthless as he brushed aside 11th-ranked Raonic in front of a partisan 15,000 home crowd but Tipsarevic had some anxious moments against Pospisil who needed medical treatment for a sore elbow in the opening set.
Thriving in the same kind of fervent home support which helped Serbia win the title for the first time against France three years ago, Djokovic was a class apart on the indoor clay.
"Winning the 2010 trophy was an inspiration to all of us to excel the following season on the ATP Tour and that's why it has a very special place in my heart," an emotional Djokovic told a news conference ahead of Tipsarevic's calsh with Pospisil.
"I've won a number of grand slams but nothing compares to sharing the joy of victory with your team mates, who are there for you and cheer on every shot you take on the court, he said."
Djokovic and Raonic traded breaks in the opening set before Djokovic, who dominated the rallies while Raonic used the slick red clay to good effect on his first serve, raced through the tiebreak and delighted the home fans in the Kombank Arena.
The electrifying atmosphere reached fever pitch when Djokovic saved a triple break point to take a 3-1 lead in the second set, pumping his fists in delight as he took the match by the scruff of the neck.
Having tamed Raonic's serve, the 26-year-old Serb broke again to lead 5-2 and then wrapped up the second set with a searing crosscourt forehand.
Although Raonic was backed by several hundred colourful Canadian fans, he succumbed meekly in the third set as a galvanised Djokovic broke serve straight away and raced through the final act to seal the match in two hours and eight minutes. That set the scene for Tipsarevic to take centre stage.
There were some jitters in the first set against Pospisil, who looked in danger of retiring after ending the fourth game grimmacing in pain.
But Tipsarevic calmed the home crowd's nerves with an emphatic tiebreak, bringing the fans to their feet.
The 29-year old Tipsarevic, ranked 23rd on the ATP Tour, raced through the second set as the effects of a gruelling five-set win in Saturday's doubles took its toll on Pospisil.
Tipsarevic took a commanding 5-2 lead in the third set but Pospisil produced one final salvo to force his way back from the brink and set up a tumultuous tiebreak.
Pospisil saved four match points from 2-6, one with a net cord, but Tipsarevic wrapped up the match in the most dramatic fashion, sending a winner past Pospisil who had tumbled over.
"This is one of the sweetest wins of my career and I hereby thank my team mates for their fantastic support," a delighted Tipsarevic said in a courtside interview after being mobbed by the rest of Serbia's squad.
"See you right here in November in the final, in another epic encounter against the Czechs," he added.
In scenes reminiscent of their 2010 triumph in the same arena, world number one Djokovic beat big-serving Milos Raonic 7-6(1) 6-2 6-2 before Tipsarevic kept his nerve to beat Vasek Pospisil 7-6(3) 6-2 7-6(6) in the deciding singles.