Murray was taken all the way by the Canadian in a hard-fought, epic battle at London's O2 Arena but finally wrapped up a 5-7 7-6(5) 7-6(9) victory in three hours, 38 minutes.
There were early signs that the contest would not be a walkover for the more experienced of the two as Murray was forced to save a break point as early as the fifth game.
The set remained with the way of serve until the 11th game, when Murray handed Raonic a break - and ultimately the set - with a double fault.
Things looked to be going from bad to worse when Raonic broke again early in the second set, but Murray immediately responded with a break of his own as the set went the distance and the Scot took the tie-break to set up a decider.
The final set again went the way of serve but with the score at 4-4, Murray had his nose in front as he made the most of three break points to serve for the match.
Raonic was not to lie down, however, and immediately shot back with a break that left Murray smashing a ball into the air in frustration.
A tie-break was again to follow and it was typically tight-knit, with Murray squandering three match points before Raonic had his own chance at match point.
That proved to be the world number four's final stand as Murray claimed back-to-back points to seal his first ever place in the final of the tournament and keep alive his dreams of ending the year atop the ATP rankings. body check tags ::