The 21-year-old third seed from Thornhill, Ont., will return to the court on Friday to face 2010 finalist Jarkko Nieminen. It will be Raonic's first ever meeting with the Finn.
"It will be a tough match, he's played well here in the past," Raonic said. "I need to keep my focus and hope to play as well as I did today."
The second-round match between two of the biggest servers in the game was surprisingly short on firepower, with the indoor match turning into a war of attrition.
The first set against Karlovic was a duel, with both men dominating on serve. It was only in the inevitable tiebreaker that the Canadian was able to pull away.
Raonic took a 4-1 lead and held off a potential comeback from the Croatian, converting on his first set point after nearly an hour of play.
"It took a bit of adjustment in the first set,"Raonic said. "The main court plays differently from the practise courts and I had not had a chance to hit on this one before the match.
"It was a matter of finding the rhythm. Once I did that the second set went much better. I was a bit hesitant in the first and more confident in the second."
Raonic began the second set with a break of Karlovic's serve and looked to close out the match leading 5-3, but Karlovic saved two match points in the tight ninth game.
The serve went back to Raonic in the 10th game and he closed out the match with a 6-4 set win.
Raonic, who had a bye in the first round, fired eight aces in the 90-minute match. Karlovic responded with five.
Raonic is playing the autumn ATP Asian swing and will compete in the Rakuten Japan Open in Tokyo next week.
The right-hander travelled to Asia after winning both of his Davis Cup matches as Canada regained a place in the World group with a defeat of South Africa in Montreal.
Raonic reached his first two Masters 1000 quarter-finals (Toronto and Cincinnati) and matched his career-best Grand Slam performance by reaching the US Open fourth round, where he lost to Andy Murray but raised his ATP ranking to 15th.
Raonic is playing the first time in Thailand after experiencing a few days at the beach resort island of Samui.
"I'm feeling really relaxed right now after a three-day holiday," he said. "It was my coach's idea — he needed a holiday also."