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Kidambi Srikanth is the lone India to enter the men's singles final at the Worlds.
This was Prannoy's second career win over Axelsen, whom he had beaten during the Indonesia Masters last year.
Axelsen won 21-10, 21-15 in the title match.
It was a memorable performance from the world No. 12 Indian as he recorded his first win over his highly-fancied rival who has a 4-0 head-to-head record before Saturday's match.
It was the Indian's first final in a BWF world tour event in 17 months. He last won a title at the 2017 French Open.