The 31-year-old James showcased soaring spins and smooth landings to earn a score of 94 in the first round of the night-time session in the Alpine town of Livigno.
James claimed halfpipe silver four years ago in Beijing and bronze in Pyeongchang in 2018.
"I wouldn't be honest if I said I wouldn’t like to achieve the top spot," James said. "I'll set myself up as best I can, get some rest tomorrow and get ready for Friday," the day of the finals.
Defending champion Ayumu Hirano of Japan also advanced to the medal round along with three of his teammates.
Jan Scherrer of Switzerland, who took bronze in 2022, was scheduled to compete but was scratched from the lineup at the last minute. A spokesperson for the Swiss team did not immediately respond to a request for comment.
Gold for James would make him Australia's most decorated Winter Olympian, eclipsing freestyle skier Dale Begg-Smith and women's snowboarder Torah Bright, who have each won gold and silver.
In the halfpipe, riders slide across a 22-foot-tall, U-shaped ramp and perform acrobatic manoeuvres in the air. Judges award points based on amplitude, variety, difficulty and other factors, with a maximum score of 100.
The qualifying event in Livigno was held in the evening with floodlights illuminating the course.
The closest rivals to James were two Japanese riders, Yuko Totsuka, who scored 91.25 and Ryusei Yamada on 90.25.
"I think the difficulty level will keep increasing," Yamada said. "I want to raise the difficulty even more in the final."
Also among the 12 qualifiers was 17-year-old American Alessandro Barbieri, who finished fourth.
"(This event is) one of the craziest I've been a part of," he said. "People are bringing their A-game."
Earlier on Wednesday, American Chloe Kim led the riders who advanced to the women's halfpipe final on Thursday.