The Croatian second seed fired down nine aces and saved all seven break points he faced to emerge triumphant in the battle of the big servers.
The 28-year-old claimed only his second claycourt title, and 17th overall, after not dropping a set all week.
“I’m on a good track and feeling very well,” Cilic, whose only previous claycourt title came on home soil in Umag in 2012, told reporters.
“In these last three or four weeks on clay, it’s never easy, but I’m trying to get better with every match. This week was a big one for me and a good sign for the rest of the claycourt season. I hope I can improve in these upcoming three tournaments - two Masters 1000 events and the French Open.”
After frustrating Raonic by bagging the closely-fought first set, Cilic capitalised on two double faults to break for a 3-1 lead in the second set.
The 2014 U.S. Open champion wriggled out of trouble in the next game despite being 0-40 down and completed victory with an ace on his second championship point.
“The critical points came in the tiebreak. I managed to play a really good tiebreak and hit a few great backhands down the line,” added Cilic.
“Then in the second set, getting that break and holding for 3-1 was definitely the deciding moment.”