Khachanov will now play his first Masters 1000 final on Sunday against the victor of the blockbuster second semi between Novak Djokovic, who will be back to world number one on Monday, and Roger Federer, who is seeking a 100th career title.
Fourteen-time Grand Slam champion Djokovic, 31, will still overtake Rafael Nadal at the top of the world rankings on Monday.
"I hope I play better than in Cincinnati because I really didn't play well", Federer said.
Although he is 3-0 in finals, he has never played in a Masters final before.
The unseeded Russian then broke Djokovic for a 6-5 lead, momentarily faltering as he tried to serve out for the set before calmly regrouping to surge ahead.
Novak Djokovic outlasted Roger Federer in a three-hour epic.
"That shows that I'm improving in my consistency, I'm becoming a better player, playing from the beginning of the tournament better and better, so that's a good thing", Khachanov said after the match. "I told him to tell him to keep it down a little bit because he was going a little bit too much over the edge".
He could yet take part at the ATP Tour Finals in London after earning a spot as the second alternate for the season-ending event.
"Karen played really well and he deserved to win that match", said Djokovic, who admitted he had struggled to fully recover after his gruelling showdown with Federer less than 24 hours earlier.
"We had epic matches throughout our rivalry but this one definitely ranks as one of the best", Djokovic said.
The 1.98m Khachanov secured a break for 2-1 with a crunching backhand pass down the line that Djokovic could only net on the half-volley.
Federer came agonisingly close to snapping his old rival's winning streak, but Djokovic held his nerve in the Paris Masters semifinal to make it 22 wins in a row.
Djokovic, who beat him on the way to the Wimbledon title, is seeking a record-extending fifth Paris Masters title and 73rd title overall.
"After that, my intensity (changed), I stepped in more inside the court, started to move him and maybe he didn't expect that", said Khachanov, who did not give up another break point in the rest of the match with his pinpoint, heavy serving.
Brimming with confidence in a season which has seen him go from No. 22 in the rankings in May to No. 1 when they are released on Monday, and in which he also added the U.S. Open to his Grand Slam haul, Djokovic created pressure throughout.
Khachanov is the first Russian to win a Masters title since Nikolay Davydenko in 2009.