Federer, who has never won the trophy in the principality, beat Novak Djokovic 7-5, 6-2 as the defending champion and world number two struggled with a right wrist injury which limited his serving to the 150kph range.
Wawrinka, the Australian Open champion, saw off David Ferrer 6-1, 7-6 (7/3), a day after the Spaniard stunned eight-time champion compatriot Rafael Nadal in the quarter-finals.
Federer featured in the last all-Swiss final when he lost to Marc Rosset in the 2000 Marseille decider, back in the days when the 17-time Grand Slam title winner was still a raw teenager.
Federer, a loser in three Monte Carlo finals to Nadal, will be making his first title bid in the tournament since 2008.
"It comes as a bit of a surprise to be in the finals, especially the first one on clay," said Federer. "But, of course, I'll take it.
"I've put in the performance to be there, gave myself the opportunity this week. So I'm very happy with my play."
Djokovic's loss ended a 13-match win streak and a run of 23 in a row at the Masters level.
"It's just a match to forget for me," said the Serb who is unsure when he will play again.
"It's unfortunate that when you're playing at this level against Roger, in a big tournament, that you are not able to play your game because something else is taking away all your energy and effort.
"This injury that has been present for last 10 days, and I tried not to think or talk about it, I did everything I could really, I was on the medications every day, I was doing different therapies, injections.
"But at the end of the day, the end of the tournament, the semi-finals are a good result. But I'm disappointed that I could not play as well as I could have."
The Easter Sunday title match-up will be huge for both Swiss men, but Federer goes into the match with a psychological edge standing 13-1 over his Davis Cup doubles partner and good friend.
"It's incredible that we are in the final together, the same week we've been playing well for some time now," said Federer.
Wawrinka won his only match in the series against Federer in the 2009 Monte Carlo third round.
"It's great, for sure, to play a Swiss player, especially Roger," said Wawrinka.
"Today I'm very satisfied with the way I played. I was very pleased with my game in the first set. I was also pleased with my game in the second set, although I was a bit more hesitant.
"He changed his tactics and became more aggressive with his forehand," he said of Ferrer, who on Friday had condemned Nadal to his earliest exit from the tournament since 2003.
Wawrinka improved to 19-3 on the season and appears to have overcome his post-Australian Open slump where he lost early in both Indian Wells and Miami.
The Swiss had not faced a break point until his meeting with Ferrer, improving his record in the series with the Spaniard to six wins against seven losses.
"Stan was very good, he was playing unbelievable," said Ferrer, who trailed 5-0 in the first set. "I didn't have options to resist him.
"I didn't return very well, but in the second Stan had a few mistakes and I was able to play with more power with my forehand. But he was better, and he moved the ball better than me."
The win marked the 100th victory for Wawrinka in Masters events and left him with a 15-6 Monte Carlo record from seven appearances.