Both players came through tough semi-finals on a rainy day in south-west London with Murray seeing off fourth seed Jo-Wifried Tsonga and Cilic edging past four-time winner Lleyton Hewitt.
Murray made the tough decision to sit out of Roland Garros earlier in the month and has slowly been playing his way back into form throughout the week.
Constant rain meant a delay to procedings but Murray's semi-final eventually started on centre court at just after 6:00pm, with the world number two sealing a 4-6 6-3 6-2 victory.
The Scot was slow out of the blocks and a double-fault gifted Tsonga a break of serve, with the French Open semi-finalist taking full advantage and finishing off the opening set with an ace.
Murray, who had not dropped a set previously throughout the week, responded well and broke in the second before levelling at one set apiece.
The third set was a more routine affair for Murray, he snaffled up his seventh break point to take a 2-1 lead and broke to love on Tsonga's next service game.
He held his next two serves to progress into the final and a tilt at a third Queen's title and he is becoming more and more pleased with his performance with each passing game.
"I'm much happier," he said. "You don't always come into this tournament with high expectations because you haven't had that long to prepare and it's always a tough draw here.
"I lost in the first round last year and had my best run at Wimbledon, but I think really because I missed the French Open it's really, really important for me to get matches in this week.
"If I had lost my first match to Mahut and going into Wimbledon and having played one match in six or seven weeks, you know, that's tough if you want to win the event. So it was really important for me to get some matches."
The reigning US Open champion admitted earlier in the week he was still searching for overall consistency in his game and conceded he had to fight back after a poor start against Tsonga.
"I turned it around well in the second set," he said. "I put it back in on my serve to get broken at four-all on the first, but he had some chances beginning of the second, and I came up with a couple of good shots. Once I got the break, I played much better."
Murray holds a great record against Croatian Cilic, winning eight of their nine previous meetings - including a straight-sets win en route to the Wimbledon final last summer.
But the 26-year-old is expecting a challenging encounter with the world number 12.
"It will be a very tough match," he added. "He plays well here. He's won nine matches in a row, and he's beaten some very tough, top grass court players this week.
"I'll try to play a good match tomorrow [Sunday] and regardless of what happens for me, it's a good step in the right direction, another tough match against one of the top 10 grass court players in the world I would say."