The shootout win, after the match finished 0-0 following extra time, put the Danes in the final of the Euros for the first time after they lost their previous five last-four encounters.
Having blown the competition wide open in the quarter-finals by beating reigning champions and eight-times Euro winners Germany 2-1, the Danes looked the better side against an Austria team competing at their first major finals.
Both sides had plenty of chances to score over the 120 minutes, with Austria's Sarah Puntigam missing the best of them as she blasted a penalty high over the bar early in the first half.
Austria had beaten Spain 5-3 on penalties to reach the semis, but this time around they failed to hold their nerve, with Laura Feiersinger missing and Lykke diving to her right to deny both Viktoria Pinther and Verena Aschauer. Denmark will meet the winner of Thursday's other semi-final between hosts the Netherlands and England in Sunday's final .
Denmark vs Austria live stream online: latest news
Denmark vs Austria live stream online: Women´s Euro 2017 preview
The Danish team that sent eight-time champions Germany packing in the women's Euro quarter-final is still under construction, aiming at the 2020 Tokyo Olympic, says coach Nils Nielsen.
Danes under construction
"The truth is we are still developing this team," he said ahead of Thursday's semi-final with Austria.
"We are trying to develop a team that can maybe not be as good as Germany and maybe not as good as France and all the other big teams, but maybe we can create a team that can stay up in the top and not have these ups and downs all the time."
Denmark were trailing Germany after three minutes last Sunday, but second-half headers from Nadia Nadim and Theresa Nielsen ended the superpower's dreams of a seventh straight title in a game postponed from Saturday because of rain.
Newcomers Austria beckon in the semi-final on Thursday, and Nielsen's memories of their last encounter are not the best as Denmark lost 4-2 in Wiener Neustadt less than a month ago.
"We played them just before the Euros and they killed us, to be honest, they were too strong, they were too fast for us, and they were going directly at our goal and we didn't like it at all," he said.
"So it's going to be a really tough match for us. We will definitely have a better plan for that match than we had for the other match but enough to beat Austria I don't know -- they've had an amazing tournament so far."
Building his team, the 45-year-old Nielsen needs "to be very patient and also make a mix of players, to give some young players the chance to play and still to have some more experienced players who can hold the team together when it's tough".
"And in this team we have Pernille Harder and we have Simone Boye, they are really strong characters and they can really hold this team together when we are in trouble, also with Germany, they were keeping us in the game."
Austria relishing Denmark challenge
Austria are going into the game against Denmark fully aware that Thursday's encounter will be a world apart from last month's 4-2 win in a friendly.
"It's going to be a completely different game, the friendly was weeks ago," right full back Katharina Schiechtl said at Austria's training ground in Wageningen.
"Denmark have presented themselves very well so far at the Euros, they've played stronger and stronger every game. Besides, they have high-class individual players like Pernille Harder.”
She was on the pitch on July 6 when Austria beat the Danes owing to braces from Nicole Billa and Sarah Zadrazil.
So was left full back Verena Aschauer, who said Denmark were a little more acceptable opponent than Germany, the eight-time champion eliminated by Denmark in the quarter-finals.
"I wouldn't prefer Germany, but in the semi-final it doesn't matter who you play against, everything is possible in one game," said the 23-year-old, who plays for Freiburg in the Bundesliga. "But Denmark sounds a little better than Germany."
Aschauer added she had no doubt Austria - which enjoys massive fan support at home - was ready for the challenge. "Our team is something very special in every sense of the word," she added."Of course team spirit is the most important thing, the key factor, but we are also very good individually.
"What makes us special is that we stick together no matter what, and we always believe until the final whistle that we can make it. That's what we proved for example in the game with Spain, but also in the other games."
Austria surprisingly won their group after beating Switzerland and Iceland and earning a 1-1 draw with France.
Aschauer and the lanky Schiechtl, who is 24 and plays for Werder Bremen in the Bundesliga, agreed the quarter-final win against Spain on penalties after a goalless draw was the biggest of their careers so far.
"Incredible, amazing," said Schiechtl. "It's a dream come true at the moment, and speaking of the semifinal we're going to put in everything we have left in us. But Denmark is going to be a hard task."
Denmark vs Austria live stream online: betting and odds
Denmark are the narrow favourites despite that recent friendly defeat. A 2-0 Denmark win is available at 11/1.