Leading 1-0 from Friday night's first leg, the Seasiders took firm control of the tie with two goals minutes either side of half-time from Stephen Dobbie and Matt Phillips.
Nikola Zigic gave Blues a glimmer of hope before skipper Curtis Davies headed the equaliser on the night - but the hosts could not find a crucial winner which would have levelled the tie on aggregate and taken the contest into extra-time, so their 62nd match of a long season proved the last.
Blackpool will now meet the Hammers at Wembley on May 19, with the most lucrative match in world football guaranteeing the winners an immediate return to the Premier League.
Both Blackpool and Birmingham, and respective managers Ian Holloway and Chris Hughton, had performed superbly in reaching the play-offs having rebuilt their ranks following relegation from the top flight 12 months ago.
But additional credit must now go to Holloway for guiding his side to the showpiece final for the second time in three seasons, although his side will have to improve upon 4-0 and 4-1 defeats to West Ham during the regular league season.
Holloway unsurprisingly kept faith with an unchanged XI from the first leg while counterpart Hughton made three changes - Zigic, Andros Townsend and Jonathan Spector coming in.
And the initial stages set the tone for a blistering encounter, with Blues having two sights of goal well blocked before Tom Ince forced Colin Doyle to save low at the other end.
Ince, man of the match at Bloomfield Road five days ago, soon found himself clean through again on the right but, with David Murphy pulling at his shoulder, the tricky winger was denied by Doyle.
Chris Burke whistled an effort narrowly wide before Marlon King, who twice hit the woodwork in the first leg, made it an unwanted hat-trick when he side-footed Murphy's excellent delivery into the ground and on to the top of the crossbar.
The game continued at a frenetic pace on a slick surface, Zigic testing Matt Gilks.
But just when it appeared as though it would remain goalless going into half-time, Blackpool doubled their aggregate advantage.
Ince's corner was only half headed out by Davies, who managed to block Alex Baptiste's subsequent overhead but the ball broke for Dobbie and his low shot agonisingly squirmed under Doyle at his near post.
Within three second-half minutes, the tie appeared all but over.
Phillips timed his burst to perfection to run off the shoulder of Murphy and bring down Stephen Crainey's long ball, with a trickling neat finish beating Doyle and crossing the line off the far post.
But Zigic gave Birmingham hope in the 64th minute with a well-taken finish having been put through by Burke.
King wasted a great chance to level things on the night having directed substitute Nathan Redmond's cross straight at Gilks.
But Davies succeeded where King failed soon after, heading home Jordon Mutch's corner.
The centre-back wasted a similar chance in the 78th minute as City pressed for a goal to level the tie.But, despite five minutes of injury time, it failed to arrive and Blackpool were left celebrating while Blues fans chanted 'there's only one Chris Hughton', with speculation linking their manager to the vacancy at West Brom.
|Birmingham City||Team Statistics||Blackpool|
|0||1st Half Goals||1|
|4||Shots on Target||6|
|9||Shots off Target||3|
|44.5||1st Half Poss.||55.5|
|49.6||2nd Half Poss.||50.4|