The Williams sisters have won the title five times each out of the last 15 at the All England Club but it was Serena who triumphed in their first Grand Slam clash since the 2009 Wimbledon final.
Meanwhile, 2004 Wimbledon champion Sharapova, 2012 beaten finalist Agnieszka Radwanska and two-time Grand Slam winner Victoria Azarenka also booked their places in Tuesday's quarter finals.
All eight Wimbledon quarter-finalists from last year are out of the tournament, while Serena and Sharapova are the only two from the world's top 12 who are still standing.
Serena secured her 14th win in 26 clashes with Venus and the sisters hugged at the net after the match on Centre Court finished 6-4, 6-3.
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Playing each other "definitely doesn't get easier", Serena said.
"I was out there, I thought, wow, I'm 33 and she just turned 35. I don't know how many more moments like this we'll have. I plan on playing for years but you never know if we'll have the opportunity to face each other."
The 20-time Grand Slam champion remains on course to completing the feat of holding all four majors at the same time, having the US, Australian and French Open titles under her belt.
Serena faces Azarenka, the 2012 and 2013 Australian Open champion, in the quarter-finals after the Belarusian 23rd seed saw off the in-form Belinda Bencic, on a career-high ranking of 22, 6-2, 6-3.
Sharapova endured her toughest test so far but still made it through to the quarter-finals with a 6-4, 6-4 win over Kazakhstan's unseeded Zarina Diyas.