Backed by thousands of passionate fans who are hoping for a first continental title in 55 years, the Koreans played their best match of the tournament and were a class above the Iraqis.
After some initial difficulties in the group phase, it all came together for Stielike's team in a 2-0 victory in front of a 36,000 crowd.
The Koreans scored a goal in each half to earn the right to play the winner of Tuesday's semi-final between Australia and United Arab Emirates in Sydney on Saturday night.
It will be Korea's first appearance in an Asian Cup final since 1988.
"The discipline of the players was important tonight," Stielike said later.
"If you know the Korean mentality and education this is what makes this team so strong.
"In the first half we had a lot of problems because we kept giving the ball away.
"We have a lot of players with little experience of games like today's but when experienced players like Cha Du-ri and Ki Sung-yueng had possesion it was a different ball game and we were more relaxed on the bench.
"We have to improve a lot if we are to win the final."
The last time Korea and Iraq met in the competition was in July 2007 when Korea lost on penalties after a goalless draw in a semi-final in Kuala Lumpur.
Korea's coach Pim Verbeek, who later in the year would take the reins of Australia, complained about his team's lack of a cutting edge.
The Dutchman said he was deeply disappointed with his players' failure to turn their territorial superiority into goals.
It's a perennial weakness in Korea's game. The Koreans are notorious for their failings in the penalty box and the last FIFA World Cup in Brazil was a case in point.
But this Asian Cup is providing them with plenty of joy at the pointy end of the pitch.
They went about their business with vigour and purpose, forcing the Iraqis to defend in numbers and rely on long punts in the direction of captain Younis Mahmoud, who was always outnumbered.
Captain Ki and Son Heung-min were particularly active in midfield and the latter brought the best out of Jalal Hassan Hachim with a dipping shot that the goalkeeper did well to tip over the bar.
Korea's pressure paid off when it inevitably took the lead with a Lee Jeong-hyeop header from Kim Jin-su's free kick.
A second goal from Kim Young-gwon early in the second half put the Koreans well in control although the stubborn Iraqis - the true fighters that they are - tried bravely to get back into the game.
Iraq pushed more men forward and enjoyed far more possession than it did in the first half but it left little impression on the Korean defence that has yet to concede a goal in this tournament.
Iraq coach Radhi Swadi paid tribute to Korea's technical superiority.
"We knew it was going to be a difficult match and that's how it turned out," Swadi said.
"The Korean team has quality players who play in high quality leagues.
"We made two mistakes which the Koreans took advantage of but if we had scored early in the match we coud have got a draw.
"I wish the Korean team all the best in the final."
