In the 25th career meeting between the Williams sisters, it was Venus who earned bragging rights with a shock 6-7 (2-7) 6-2 6-3 win after just over an hour in Montreal.
Venus' triumph - her 11th against Serena - was her first over a reigning world number one since upstaging Dinara Safina in the 2009 Wimbledon semi-finals.
The 34-year-old fended off 19 aces from Serena to advance to Sunday's decider, where she will face Agnieszka Radwanska after the third-seeded Pole overcame Russian Ekaterina Makarova 7-6 (7-1) 7-6 (7-3).
"The level of game we played was pretty high," said Venus
"We're both serving well, returning well, moving well - everything is happening so well that all of our matches seem to be very competitive."
Venus stormed out of the blocks to take a 3-1 lead only for Serena to hit back, levelling the match at 3-3, before eventually closing out the opening set in a tie-break.
Two breaks of serve in the second stanza - the first coming in the opening game - set the tone as Venus forced a third set.
It was a similar story in the deciding set, with Venus breaking Serena's serve in the sixth game to reach her second final of 2014, having won the Dubai Tennis Championships in February.
Following Venus into the final was Radwanska, who finally got the better of Makarova in straight sets after two hours and four minutes on court.
Radwanska had lost her past two meetings against Makarova, slipping up at the US Open in 2013 and Wimbledon in June.
But the 2012 Wimbledon finalist exacted revenge, making the most of Makarova's 43 unforced errors.
Radwanska finished the match with 28 winners and just 14 unforced errors.
"I think it was a great match," Radwanska said.
"Two hours of fighting and long rallies and tight games - I had to really run a lot to win that match because she's so good. I had to give 100 per cent today.
"I think I was just better on a few points today. I'm really happy with the win."