Raonic was always in control as he won comfortably against Germany's Benjamin Becker 6-4, 6-3, 6-3 while Pospisil was beaten 6-2, 6-4, 6-4 by Spaniard Guillermo Garcia Lopez.
Becker, who eliminated Australian Lleyton Hewitt in the previous round, was no match for 22 aces off the racket of the eighth seed from Thornhill, Ont.
It took the winner four match points to see off Becker with a break in the last game. Becker saved the first three Raonic winning chances before the Canadian went through after Becker's double-fault.
Raonic earned the victory with 46 winners, 19 unforced errors while breaking on five of 14 opportunities. He will next face 12th-seeded Feliciano Lopez of Spain, who beat Poland's Jerzy Janowicz 7-6 (6), 6-4, 7-6 (3).
"I'm happy with how I'm playing," said Raonic, who played and won on the third showcase court, the Hisense arena. "I can't complain, everything has been working for me on this court and the results have been good.
"My game feels great and I'm having a lot of fun. I look forward to going on."
Vancouver's Pospisil had been bidding to join Raonic by reaching the fourth round of a Grand Slam for the first time.
But the fitness factor came into play for the No. 60, who had suffered in his previous win on Thursday and withdrew after just nine minutes of doubles on Friday. He said a back muscle problem which troubled him earlier in the week bothered him Saturday.
"My problem is nothing serious — nothing like last year — but we need to look into it a bit deeper. It didn't get better after the last match. I struggled with timing and my serve. I had a bad start and he came out really sharp."
Pospisil committed 40 unforced errors and broke on one of six occasions. He dropped the first two sets but staged a minor rally in the third set, firing off two love games for a 2-1 lead before being overhauled by his Spanish opponent.
The Canadian, who saved a match point before Garcia Lopez finished him with a backhand winner down the line, was reflective in defeat.
"I wanted to do well here. Maybe I put some pressure on myself. I believed I could play well. My serve was off and that's a weapon that helps me to win matches."
Raonic's victory in 101 minutes improved his record over the 41st-ranked Becker to 3-1. Raonic, who reached the Wimbledon semifinals last summer, won his 13th career match in Melbourne against four losses.
He was never threatened by his journeyman opponent, winning each of the first two sets in 30 minutes.
Raonic claimed the opener with a break in the final game with a forehand winner to the corner past Becker. The second set also featured only one break, with Raonic converting for a 4-2 lead.
Two games later, Raonic set up two set points with an ace only to double-fault the first chance away. But his 17th ace solved the problem on the second opportunity.
In the third set, Raonic broke in the fifth game and climbed to 5-3 before closing it out.