The hard-serving 21-year-old from Thornhill, Ont., served 17 aces, including three in the final game, to beat 10th-ranked Nicolas Almagro of Spain 6-4, 6-4 and reach the third final of his career.
Raonic will meet top-seeded Janko Tipsarevic of Serbia, who ended Japanese qualifier Go Soeda's run with a 6- 1, 6-4 victory.
"It is an important day (Sunday) because the recognition you get as a tour winner is different," Raonic said of his first meeting with Tipsarevic. "I am going into the final with a positive frame of mind. I am happy with my service game and if I am able to create opportunity in returns, I know I stand a good chance to win tomorrow."
The fourth-seeded Raonic rose from No. 156 in the rankings to a career-high 25th last season before moving down slightly to his current No. 31. He won the ATP Newcomer of the Year award last year.
His fourth career victory against a top-10 player came after he picked up a break in the ninth game of the second set.
"He played really well and he served like a monster," said Almagro, who was aced 10 times in the opening set. "Over 80 per cent success in the first set for sure. With that serve you have many, many chances to win a match."
Raonic has a 1-1 record in ATP World Tour finals. He won his first ATP title in San Jose last February and finished as the runner-up to Andy Roddick in Memphis the following week.
Tipsarevic, meanwhile, broke his 120th-ranked opponent in the second and fourth games to clinch the opening set.
The gritty Japanese player, who beat defending champion Stanislas Wawrinka in the quarter-finals, put up a fight in the second set with the pair trading breaks. But Tipsarevic broke in the seventh game to move into his eighth tour final.
With files from The Canadian Press.