The power-hitting right-hander's cliffhanger 6-4, 1-6, 7-6 (4) victory over Vasek Pospisil on Saturday made him the first Canadian to reach the final of his country's biggest tournament since Robert Bedard won it for the third time in 1958.
It will be Raonic's first final in the Master series, a level of ATP tournament just below the grand slams.
The other semifinal was a gem of speed and skill, as Nadal ended Novak Djokovic's two-year reign as Rogers Cup champion with 6-4, 3-6, 7-6 (2) victory. Nadal will be seeking a third title after winning in 2005 and 2008.
It had drama, as Djokovic wasn't pleased at all to be accidentally hit in the face by a Nadal cross-court shot in the third set, but there was no harm done.
The two traded shots evenly until the third-set tiebreaker, when the crowd favourite Nadal took a 6-0 lead and later saw it end when Djokovic hit a groundstroke a tad long.
"Milos is a fantastic player," Nadal said in a courtside interview. "I know him well. He has played a fantastic tournament here.
"I'm very happy for Canada to have two players in the semifinals."
Raonic is 0-3 against Nadal in his career and has never won a set from the Spaniard.
"Last time he gave me a whoopin' in Barcelona," said Raonic. "It was a very different surface on clay. And at home for him, it was tough.
"When I played him in 2010, I was like 200th in the world. I held my own to a certain extent, but he was a much, much better player than I was. In 2011, it was my first tournament back from hip surgery. I think it's a different situation this time around.
"I have to try to play as much as I can on my terms. I'm going to have to serve well. That's always of highest importance. And I've got to try of create opportunities for myself through aggressive tennis, rather than waiting for him to make errors."
Raonic's win will put him into the top-10 in world rankings — a prestigious spot that only the very good ones ever achieve.
"They're all very special, but I think the top-10 one stands out more just because it's a goal that I set this year," the 22-year-old from Thornhill, Ont., said. "It looked a little bit difficult after how I played recently, but to do it here in Montreal is a relief and it's a happy feeling."
Meanwhile, it was a tough night for veteran Daniel Nestor of Toronto. He and Swedish partner Robert Lindstedt were thumped 6-3, 6-0 in a semifinal against Wimbledon champion Andy Murray and Colin Fleming.
Djokovic and Nadal met for the 36th time, tying the record for the Open Era set by John McEnroe and Ivan Lendl. Nadal leads the head-to-head series (21-15), and cut Djokovic's lead on hardcourts at to 11-6.
Nadal has won seven tournaments this year, but only one so far on a hardcourt. Still, the king of clay courts is 8-0 on the hard surface.
Pospisil, in his best ATP Tour showing, earned $128,960 and 360 rankings points for reaching the semis, which will push his ranking from its current 71st to about No. 40. That completes the Vernon, B.C., native's goal for this year of reaching the top-50.
On the court, both played nervously at first and it turned into a serving battle, with few interesting rallies until the final point of the third-set tiebreaker to decide the match.
Raonic stretched to get to a Pospisil shot at the net, forcing his opponent to make a lunging volley that went into the net.
"I was winning most of the points from the baseline once the rallies were started," said Pospisil. "The tiebreak got away from me a little bit there at the end, a couple of loose points.
"But I went for it. No regrets. I didn't want to lose the match playing defensively. I tried to go for it even with the nerves that there were. This time it didn't work out, but that's the right way for me to go."
The two Canadians have been playing each other since they were in under-14 tournaments, but while Raonic has used his big serve to shoot up the rankings in recent years, Pospisil has taken a slower route.
He has caught fire of late, however, winning a Challenger series tournament last week in Vancouver, then posting three wins at the Rogers Cup, including his first win over a top-20 player (John Isner) and his first over a top-10 (Tomas Berdych).
It ended against Raonic, who has been struggling since he won in San Jose in the spring and is now working with a new coach.
Now the Davis Cup teammates may become rivals on the ATP Tour.
"For my sake, I hope we'll see each other a lot more," said Pospisil. "That will mean I'll keep up the good form.
"I don't see why not because I've been doing really well the last couple months."
The centre court crowd had been on its feet for Canadian players all week, but with two playing each other, the partisan clapping and chanting between points was gone.
And there was little to get excited about in the first set, as Raonic had the only service break for a 3-2 lead just after Pospisil let two break points get away.
"Early on we were both pretty nervous," said Pospisil. "It wasn't the moment.
"It was the fact I was playing Milos. It's probably a little bit the same for him. We played each other so many times. We grew up together. I don't think either one wanted to lose."
It all went Pospisil's way in the second set as he broke twice for 2-0 and 5-1 leads against a suddenly listless Raonic. Pospisil punctuated set point with a leaping fist pump.
Raonic took a restroom break after the set and came back with a strong service game and the two held service through to the tiebreaker.
"I had so much bottled up inside of me that it was stopping me from playing my best tennis," said Raonic. "I sort of yelled at myself, got a lot of emotions out, told myself if this is going to happen, it's going to be me going out there and pushing as much as I can.
"The first game, I started serving 20 km/h harder. I told myself that I've got to leave it all out there."
They were the first Canadians to reach the semifinals of the tournament — once called the Canadian Open — since Mike Belkin lost to American Cliff Richey.
The last time two Canadians were in the semifinals of an ATP Tour event was in 1990 at Rio de Janeiro, where Andrew Sznajder lost in the final and Martin Wostenholme was beaten in the semis.
The Djokovic-Nadal match was another level of tennis entirely, as the current and former world No. 1's exchanged fast-paced, often spectacular rallies.
Pospisil earned entry into next week's tournament in Cincinnati, where he will face Frenchman Gilles Simon in the first round. Raonic is seeded 12th and will play American Jack Sock.
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