Federer, irrepressible in his semi-final win over Dominic Thiem, was off-colour from the start at Pat Rafter Arena and his 25-year-old opponent feasted repeatedly on his wayward backhand.
Beaten in three tight sets last year, Raonic won at a canter in the rematch to clinch his eighth tour title and complete the perfect buildup to his bid for a maiden grand slam at the Australian Open starting later this month.
Closing out the match with a booming first serve that Federer could only parry long, Raonic roared in triumph, having beaten the 17-times grand slam champion for only the second time in 11 encounters.
He accepted the winner’s trophy from 77-year-old Australian great Rod Laver, the only player to complete the calendar grand slam twice.
“Hopefully (we have) a better year this year than the last,” Raonic said in his victory speech, delivering a message of peace.
“I hope in 2016 we learn to love each other a little bit more and the world becomes a safer place.”
Although wearing a furrowed brow for much of the match and showing rare negative body language, Federer was gracious in defeat but referred to a flu that had troubled him during the week.
“I’d like to congratulate Milos on a great start,” the 34-year-old said.
“This year you deserve it, well played and good luck at the Aussie Open.
“I was a bit sick but we made it to the final.”
Long tipped to rock the tennis establishment, Raonic showed a bullet-proof poise in response to his opponent’s frustration and broke Federer’s serve in the ninth game of the opening set.
Federer blasted a forehand long to concede the set then blew a gilt-edged chance to break Raonic early in the second by spraying a backhand long.
Missing a regulation forehand winner down the line, Federer gave up a break-point and Raonic captured the decisive break in the eighth game.
Federer battled hard to put the set back on level terms, but Raonic’s thunderbolt serve proved to be impenetrable.
(Reporting by Ian Ransom in Melbourne; Editing by John O’Brien and Pritha Sarkar)