The seventh-seeded Hercog will play four-time Palermo champion Anabel Medina Garrigues of Spain on Sunday. It's the first Palermo final since 2007 without an Italian player.
Hercog eased to a 5-0 lead before Pennetta, who won here in 2009 and was runner-up last year, found some rhythm against her hard-hitting opponent.
The 20-year-old Hercog used two early breaks in the second to set up the victory.
The fifth-seeded Medina Garrigues defeated Petra Cetkovska of the Czech Republic 7-5, 6-3 to reach the final, 10 years after she won her first career title at the tournament.
The 28-year-old Medina Garrigues, who also won from 2004-06, is aiming for her 11th career title and second of the season.