The Swiss star and former No. 1 advanced to a finals matchup against Tomas Berdych, who edged Juan Martin del Potro 7-6 (5), 7-6 (6) in the other semifinal.
A victory will push Federer ahead of Spain's Rafael Nadal in the rankings.
"It's going to be a tough match," said Federer. "Berdych is playing well himself. It's quick conditions and he can be a big threat in the finals like that."
While both Rafael Nadal and top-ranked Novak Djokovic vowed to never again play on Madrid's new blue-clay court after early exits, Federer's more technical style has not been overly hampered by a surface many players have criticized as slippery.
Federer, who won at Madrid in 2006 and 2009, shook off gusting winds in the late afternoon to hit 25 winners and eight aces en route to the easy victory.
While dominating on serve, Federer moved Tipsarevic around the court with an expert mix of shots until breaking for a 3-1 lead with a low slice that the Serb hit into the net.
Federer broke again to claim the first set by drawing an error from Tipsarevic with a forehand that clipped the sideline.
Tipsarevic, who had upset Djokovic on Friday, fell behind for good at 3-1 in the second set when he could barely graze Federer's crosscourt return.
Federer holds a 10-4 record against Berdych, but the Czech has won three of their last five meetings.
"(Berdych) got me in big matches in my career in Wimbledon and at the Olympics. I got him back at the same places," Federer said. "Still I remember those losses vividly. I think that we match up pretty well against each other because of the shot-making."
Sunday will be the 30-year-old Federer's 104th final, where he will seek his 74th career title.
Earlier, the sixth-seeded Berdych, who hadn't won a set in his last three matches against Del Potro, scored 15 aces to overcome the Argentine's skilled baseline game.
"It was really just about one or two points that decided for my side," said Berdych. "It was really close. We fought for every point and I am really happy to have gone through."