The Briton, seeking his 12th win in a row, lost 7-5 6-2 against the defending champion in one hour and 41 minutes.
Murray, who has lost all four matches against the Serb this year, will now take a week off before the end-of-season World Tour Finals in London.
Djokovic will face Japan's Kei Nishikori in the last four in Paris. Murray, 27, has played 23 matches over the past six weeks, winning three titles, and could not prevent the Serb from winning the final five games of the match as fatigue took its toll.
But the Scot had already achieved a major goal by qualifying for the Tour finals with his win over Grigor Dimitrov on Thursday.
There remains clear water between Murray and Djokovic - as there has been all season - but Murray's form has improved so much over the past six weeks that he will relish the chance to take on his rival when he's not playing his 23rd match in 37 days.
"Murray - as honest as ever - admitted he didn't serve well enough, and felt he started rushing when he went in front at the start of the second set. A sign, perhaps, that he doesn't yet feel as confident as he needs to when sharing a court with the world number one."
"The first set was tight, the second set I got up a break and lost my way a little bit," he said of his defeat to Djokovic.
"I saw some stats after we finished and as soon as the rallies got over five shots I was winning more, but the rallies that finished before five shots, I think he won 25 more points.
"That would suggest that he was serving better and I didn't return as well as him.
"It has been a positive run over the last few weeks and now I'll get a bit of rest and ready for London."
The result was a boost for Djokovic's chances of ending the year at the top of the world rankings, especially as his nearest rival Roger Federer lost his quarter-final.
Milos Raonic beat world number two Federer 7-6 (7-4) 7-5 to gain his first win in seven meetings with the Swiss and secure his place at November's World Tour Finals in London.
Raonic's place, and the rest of the line-up at the season finale, was confirmed as Nishikori beat Spain's David Ferrer 3-6 7-6 (7-5) 6-4.
Nishikori, 24, becomes the first Asian-born singles player to qualify for the event.
