With third seed Maria Sharapova and world number one Serena Williams both losing in the fourth round, Azarenka has firmed as favourite to retain her crown and become the first woman to win three successive Melbourne Park titles since Martina Hingis (1997-99).
"I just love playing here. It feels so cosy. It feels like I'm in my living room, on my couch," Azarenka said.
"I can have some chips and salsa - that's how it feels."
"After those first four games, I was thinking that I'm going to spend on court for sure three hours today," Radwanska said.
"But I think that first break in the first set was the key.
"Really, she was playing such good tennis from the first point to the last one - really aggressive. I think as the match went on she started making some more mistakes but I still needed to concentrate 100%. Overall, I'm happy to close a match like that in two sets."
Azarenka and Stephens had played a controversial match in the semi-finals last year and their clash on Monday had the potential for more when Stephens blasted a shot back at Azarenka that hit her in the upper thigh in the first set.
"I thought she was going to move and she didn't," said Stephens
The Belarusian appeared to ignore Stephens' apology and repaid the American with a similar shot shortly afterwards.
Azarenka then controlled the match from the baseline and waited for the 20-year-old to make errors, wrapping up the win in 91 minutes.
"You just go out and do your best," Stephens added.
"Unfortunately I didn't win today, but there will be others."
After the match, Azarenka was quizzed about whether she might be about to marry her boyfriend, the rapper-singer, Redfoo.
"There's nothing still (showing off her ring-free left hand)," she said. "Once you see a big, big bling... big, big bling... maybe."
Denmark's Caroline Wozniacki has been sporting a dazzling ring after agreeing to marry golfer Rory McIlroy and Azarenka said the competition was on.
"It had better be bigger than Caro's," she said in an on-court interview.