Ricci will fight Colton Smith, a U.S. army Ranger, in the live finale Dec. 15 in Las Vegas, with a UFC contract and custom Harley-Davidson motorcycle on the line.
"I think we ended up with the two best guys here," said UFC president Dana White.
Ricci, described on the reality TV show as "Canadian pretty boy" with "stunning power" has the chance to become the first Canadian winner of the series. Patrick (The Predator) Cote made the final in Season 4, which featured veteran UFC fighters making a comeback, but lost the middleweight final to Travis Lutter.
Smith won a decision over Jon Manley in the other semifinal that aired on Friday's episode.
The semifinals pitted teammates against each other: Ricci and Magny were both members of coach Shane Carwin's team while Smith and Manley were on Roy Nelson's squad.
Magny appeared to be knocked out by Ricci's elbow, dropping like a stone. When he finally regained his feet with the fight over, he grabbed referee Steve Mazzagatti as if he thought he was his opponent.
"The truth is I would rather have won by decision than to do that to him, because it hurt," an emotional Ricci said of defeating his teammate.
"I know what it's like to be Neil. I've been knocked out before," he added. "That feeling where you wake up and you don't know what happened. And you know all your dreams are shattered and all the opportunity you thought you had is gone. But if I didn't do it to him, he would have done it to him so I had no choice."
Ricci's winning streak ended in April 2010 in his Bellator debut. Pat Curran floored him with a crushing right that knocked him senseless less than two minutes into the fight.
The knockout left him with a mild concussion, prompting him to take eight weeks off from sparring. Mentally, he needed a longer break, however, and stepped back from the spot for 10 months.
In the other semifinal, Smith used takedowns and domination at the fence to win the first two rounds. Manley rallied in the third, scoring with some strikes but it was not enough.
Earlier in the series, Ricci defeated Dom Waters and fellow Canadian Michael Hill — eliminating Nelson's top picks in the process.
Ricci trains at the Tristar Gym alongside Georges St-Pierre. The 26-year-old from Montreal moved up a weight class from lightweight (155 pounds) to welterweight (170) to compete on the show.
Friday's episode started with members of the Nelson team expressing their dissatisfaction with their coach.
"We could have got a little bit more attention from you and the other coaches," Joey Rivera told Nelson.
"Everyone has an excuse," Nelson said.
The show features 16 fighters — welterweights on Season 16 — who spend six weeks locked up in a Vegas mansion other than training or fighting.
White says the series, which airs on FX and Sportsnet, is the UFC's equivalent of baseball's triple-A developmental league.