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Eighth seed Ruud held his nerve as five unforced errors from Djokovic allowed him to go 3-0 up in the decider and he calmly closed out the victory.
Ivanisevic, who claimed the singles title at Wimbledon in 2001 after finishing runner-up in 1992, 1994 and 1998, joined Djokovic's team in 2019 and helped the 36-year-old win nine Grand Slam titles.
'This is a miracle,' said Nardi, who lost to David Goffin in the qualifiers and only got into the main draw after Tomas Etcheverry withdrew due to injury.
The world No. 1 is seeking an unprecedented sixth title at the Masters 1000 event that begins next week and is regarded as the biggest tennis tournament outside of the four Grand Slams.
Carlos Alcaraz, Jannik Sinner, Daniil Medvedev and Holger Rune will also play at the 'Six Kings Slam', which will form part of the Saudi cultural and entertainment festival Riyadh Season.
Sinner broke for a 3-1 lead in the fourth set and ran away with the match to snap the Serb's 33-match winning run at Melbourne Park and end his quest for a record 25th major.
Sinner's victory snapped Djokovic's winning streak of 33 matches at the Australian Open going back to 2018 and was the world No 1's first loss in 11 Melbourne semifinals.
Gauff set up a semifinal clash with Sabalenka in a rematch of last year's US Open final.
More than three hours of playing with one of the best players of all time started to take its toll on Prizmic and Djokovic drove home his advantage to take his 90th win at the Australian Open in just over four hours.
Top-ranked Iga Swiatek faces a tricky test against 2020 champion Sofia Kenin first up in the women's section.