The Seleccao secured their passage to the semi-finals of the tournament with wins over the Netherlands and Denmark in Group B, before a Cristiano Ronaldo header gave them a 1-0 win over the Czech Republic in the last eight.
The former Porto and Wolfsburg man Costa stated that confidence is high in the Portuguese camp as they prepare to lock horns with world champions Spain.
"We are very well prepared physically, and we are a very strong group mentally," the 31-year-old said at a press conference.
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"I hope the people who said that Portugal can't reach the final get disappointed in the end, because we definitely have our chances.
"We have 90 minutes - or 120, if it eventually goes to a penalty shootout, to reach the final. We'll try to be at our very best and book a place in the final."
Paulo Bento’s men have improved throughout their campaign in Poland and Ukraine, and Costa believes that if they get another chance to face Germany in the final of the tournament then they may be able to avenge their 1-0 loss in the group stage.
"As for the match against Germany, we're a different team now. Although in the second half, I think we proved we can beat the Germans, I think that result was unfair in the end," he said.
"But lets not speak too much about Germany, because we don't know if they will get to the final, and we don't know if we will get to the final."