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Federer has now officially gone 15 Grand Slams without winning any.
His last victory was at Wimbledon in 2012.
Raonic is the first non-European male finalist at Wimbledon since the USA’s Andy Roddick seven years ago.
'This one clearly hurts. I could have had it. I was so, so close,' said Federer after his semi-final defeat.
Canadian Milos Raonic recovered to upset seven-times champion Roger Federer 6-3, 6-7(3), 4-6, 7-5, 6-3 at Wimbledon to reach his first Grand Slam final on Friday.
The sixth seed will meet Britain's 2013 champion Andy Murray, who beat Tomas Berdych 6-3, 6-3, 6-3 in the other semi-final, in Sunday's showpiece match.
Raonic survived four set points in the second before losing it on the fifth, the first one in the tiebreak, but after a dominant third set from Federer the Canadian came back in the fourth by converting his second set point.
This year's Australian Open semi-finalist then dominated the final set to record his third win in 12 meetings with Federer and dash the Swiss world number three's bid for a record 18th grand slam crown.
Murray tormented Berdych before reaching his third Wimbledon final.
The second seed was totally dominant in the early-evening sunshine on Centre Court, ruthlessly dispatching the burly Czech who never threatened to stop the Murray bandwagon.
2013 champion Murray will be eyeing his second Wimbledon title and his third overall Grand Slam (2012 US Open champion).
