A whirlwind start to the second half shot Donegal into their third Ulster U-21 final in four years, but not before being pushed all the way by determined Derry at Healy Park.
Caolan Ward got up from full-back for a goal just a minute and a half after the re-start, latching onto Patrick McBrearty's ball inside before planting past Christopher Bradley.
The teams had been level at the break, but Donegal got the bit between their teeth and McBrearty and Ryan McHugh stretched the lead to five and secured their place in next Wednesday's final against Cavan.
Frees by Ryan Bell kept Derry within touching distance and two minutes from the end, the Ballinderry ace magnificently fetched a ball on the edge of the square, but a blistering shot cracked off the crossbar.
Derry had failed to make the most of a bright opening with three wides inside the opening two minutes and although Aaron Devlin and Fintan Bell did manage to get their shooting boots on, Donegal turned the tables in with a ninth minute goal, started and finished by Odhrán MacNiallais.
When Conor Gibbons (2) and McBrearty scored three in as many minutes, Donegal moved four ahead, but it should have been more as Bradley denied McBrearty from close-range.
Derry got a new lease of life and three Ryan Bell frees helped them lead again only for a late McBrearty score to send the teams in deadlocked at the interval, 1-5 to 0-8.
Donegal, despite their early second half scores, lived dangerously in the closing stages, but Maxi Curran's boys clung on.
DONEGAL: P Boyle; K McFadden, C Ward (1-0), P Carr; E McHugh, M O'Reilly (0-1), R McHugh (0-1); C Cannon, L Kelly (0-1); L Keaney, P McBrearty (0-5, 2f), G Gallagher; W Gillespie, O MacNiallais (1-0), C Gibbons (0-2). Subs: D O'Connor (0-1) for Gillespie (37), C Parke for Cannon (42), C Barrett for Carr (50).
DERRY: C Bradley; G McKinless, P Quinn, D Brown; K McKeague, C McAtamney, J Morgan; R Bell (0-6, 6f), R Dougan; N Rocks, C McFaul (0-1), K Conway (0-1); F Bell (0-1), A Devlin (0-3), C Spiers (0-2). Subs: C Kearns (0-1, 1f) for Morgan (21), M McCloskey for Brown (35), S McGuigan for F.Bell (47), R Moore for Dougan (56), R O'Kane for Rocks (56).
Referee: M McNally (Monaghan).