Aiming for a first Masters title in 15 years, Higgins overturned a 5-3 deficit with a nerveless late surge, sealing victory on the final black after a pressure-laden clearance from the last red.
At 50, the four-time world champion rolled back the years inside Alexandra Palace, reaching the Masters semi-finals for the first time since 2018, albeit with the caveat that he finished runner-up in 2021 when the tournament was staged in Milton Keynes.
A Masters winner in 1999 and 2006, Higgins is contesting his tenth semi-final at the event and becomes the oldest player to reach this stage since Eddie Charlton achieved the feat in 1983.
Both competitors were greeted by a standing ovation as they entered the arena, and Zhao, the reigning world champion, settled quickest with an opening break of 89.
Higgins replied in emphatic fashion, compiling a fluent 114 to restore parity. Zhao then produced a superb long pot on the third-last red in frame three, eventually moving 2-1 ahead, only for Higgins to respond immediately with a break of 64.
A 74 from Zhao restored his lead, before Higgins steadied himself by taking frame six with runs of 43 and 37.
The seventh frame hinged on the final red, Zhao laying a clever snooker to nudge back in front at 4-3. Frame eight threatened to swing decisively in Zhao's favour when Higgins missed a difficult black after potting the last red, a lapse that was ruthlessly punished as the Chinese star opened up a two-frame cushion.
Higgins scraped his way through a disjointed ninth frame, then enjoyed a slice of fortune in the tenth when a missed long plant saw a red drop unexpectedly, allowing him to level the match at 5-5 with a break of 58.
The deciding frame delivered the drama the occasion deserved. Higgins had first look and made 34 before faltering, Zhao replying with 53 and tightening the screw with a snooker on the last red.
Higgins escaped but left a demanding pot to the baulk corner. Zhao went for it with conviction, only for the red to rattle and stay out. Given one final opening, Higgins cleared with 31, finishing on the black to punch the air in visible relief.
"I was so lucky, in the second last frame I tried a plant and butchered it and fluked a ball," Higgins told BBC Sport.
"Then I got a chance in the last frame, and I don't normally play those plain ball shots across. I should have screwed up for a baulk colour, and I missed.
"I fancied him going for the red. He missed, got me in a snooker that I got out of and then it's a tough one he misses.
"I am delighted, and I am so proud I am still doing it. So proud I am to be through to another semi-final here, and I will enjoy it.
"I've got Mark Allen or Judd Trump next, two of the best players we have ever seen play the game, so it'll be tough. I will enjoy it and give it my best."
The Scot will now face either Judd Trump or Mark Allen on Saturday afternoon, standing two wins away from becoming the oldest Masters champion in history.