Swiatek was only able to hold her serve once in the first set as Pegula raced to a 5-0 lead and the American world number three kept up the pressure with some brilliant returns in the second set.
Pegula secured a dominant victory that will also give her a personal boost heading into this month's Australian Open when Swiatek sent a forehand wide after little more than an hour on Ken Rosewall Arena.
"I thought I did a good job playing really aggressive, serving smart and returning really well," said Pegula, who had lost her previous four matches against Swiatek.
It was her first career victory over a reigning number one and a result that left Swiatek in floods of tears in Poland's dugout after the match.
"She's one of the best players in the world so you have to be really on top of your game to win against Jessie," Swiatek said. "It was always like that, even last season.
"So I'm not surprised, because I know what she can do. I'm more surprised I wasn't able to step up to her game today."
See all the details of the match
Tiafoe gave the Americans a 2-0 lead when he comfortably beat Kacper Zuk 6-3 6-3, saying after the match that Pegula's performance had inspired him.
"It was great, I was so amped watching. Forget about me playing, I was so happy for Jess ... I know what it means for her going forward," said Tiafoe, who has won all four of his singles matches in the event, dropping one set.
TREVISAN OUTLASTS SAKKARI AS ITALY SURGE
Martina Trevisan gave Italy the early advantage in the other semi-final of the mixed team tournament by stunning world number six Maria Sakkari of Greece 6-3 6-7(4) 7-5 in a gripping battle that lasted more than three hours.
Lorenzo Musetti then put them completely in control at 2-0 with a 6-1 6-1 victory over Stefanos Sakellaridis.
The semi-final ties resume on Saturday with two more singles matches and a mixed doubles rubber. The final will take place the following day.
