Nadal, who won in the Principality from 2005-2012, claimed a 2-6, 6-4, 6-2 victory over Murray and extended his record against the Briton to 17-6 and 7-1 on clay, reports Xinhua.
The fifth seeded Spaniard, who has been struggling since losing the 2013 final to Novak Djokovic, overcame a sluggish start on Saturday and broke serve in the seventh game of the second set to take the initiative.
He later demonstrated his mastery on clay by breaking at the beginning of the third set before reaching the 100th final of his career.
"It's great to be back in the final," said Nadal. "Every year is different. I'll never be the same as I was in 2009 or 2013. I want to play better every day."
Nadal, 29, has not won a Masters title in two years and a victory on Sunday will earn him a chance to equal Djokovic's record of having 28 Masters titles.
His final hurdle will be the 13th seed Monfils, who eased past Jo-Wilfried Tsonga 6-1, 6-3 in an all-French semifinal, breaking the eighth seed's serve six times in just over an hour.
Monfils, also 29 years old, is the first Frenchman reaching the final at Monte Carlo since Cedric Pioline in 2000. (IANS)