Venus, the champion in 2000, 2001 and 2005, overpowered the Russian second seed and 2004 winner, and now faces Sharapova's compatriot Svetlana Kuznetsova for a place in the semi-finals.
Sharapova admitted she had been powerless to resist.
"I got off to a slow start and couldn't get any rhythm but I started serving a lot better in the second set," she said.
"But at the end of the day she was averaging 115mph on her first serve and I just could not give myself chances on the return."
Williams suggested her performance had been close to flawless.
"My serve definitely was a weapon, my return was very, very good. I played the percentages when I had to and when I had a chance I went for it."
Williams's form was in sharp contrast to some erratic displays in the earlier rounds, but she insisted she had always been confident of raising her level when it was required.
"My whole life I've been a big match player," she said.
"I always feel very confident, the only thing can happen is that I can make errors and allow opponents into the match. Today those errors were not there and that made it much easier for me."
Sharapova failed to win a single break point, allowed her opponent 19 opportunities and managed to win just two points off the Williams serve in the entire second set.
Henin beat Serena for the seventh time in 11 career meetings.
Williams, the US seventh seed, arrived on court with her left calf still bandaged, a legacy of her controversial, injury-hit win over Daniela Hantuchova in the previous round.
Henin went into the match having lost just 15 games in four matches and was a set ahead courtesy a break in the ninth game of the opening set.
But the American bounced back as her seventh ace of the match evened the tie although it needed the reassurance of the Hawk-eye system before the game and set was called.
As the light on another rain-affected day on Centre Court got worse, it was Henin who was finishing the stronger, breaking in the second and sixth games to go to 5-1.
Williams then fought back to thwart Henin's attempt to serve for the match and broke back before holding to trail 3-5.
Williams managed to save one match point when Henin dumped a backhand volley into the net but she then hit long on the second match point – giving Henin victory after a 1 hr 45min tussle.