The 37-year-old downed a battling Ruud, whose father Christian was in the draw when Federer made his Paris debut 20 years ago, 6-3, 6-1, 7-6 (10/8).
Federer, the champion in Paris in 2009, has now made the fourth round at the French Open for the 14th time where he will face Argentina's Leonardo Mayer.
He is the oldest man to reach the last 16 in Paris since Nicola Pietrangeli 47 years ago.
“Well, it is impressive,” said the 20-time major winner who has already passed the 100 title mark in his career as well the $100 million prize money barrier.
“It's even more pleasant to do this at Roland Garros, because I have a lot of records, milestones from Wimbledon and the US Open.
“But doing anything at Roland Garros is very special, because I played a lot here. It was my first Grand Slam where I was in the main draw.
“It's the closest one to Basel (his home town), and this counts, as well.”
Federer fired 11 aces and 52 winners past Ruud who was just five months old when the Swiss made his main draw debut in Paris in 1999.
Federer, playing the French Open for the first time since 2015, eased through the first two sets against world number 63 Ruud on Court Suzanne Lenglen.
But the 20-year-old Norwegian made a match of it in the third set, saving three match points in the tiebreaker and carving out a set point of his own before Federer delivered the knockout blow.
Should Federer go on and win the title a week on Sunday he would become the oldest men's Grand Slam champion of all time.
It's that possibility as well as the knowledge that his career is winding down which has him admitting he's feeling a touch nostalgic on his return to Paris.
“I feel that my 20 years on the tour went too fast,” he explained.
“When you play against people like Casper Ruud, you ask, How was it at the time? When I started on the tour he was hardly born.
“I guess it's mainly due to the fact that I didn't come here for many years.”
Federer has already admitted that he is nowhere near being the favourite for the title in Paris despite his third seeding.
World number one Novak Djokovic, bidding to become only the second man to hold all four Slams at the same time twice, and 11-time champion Rafael Nadal are expected to contest the final a week on Sunday.
“A few months ago I didn't know what to expect with anything,” said Federer.
“Now I know where my level's at. I still don't know exactly where my absolute best is, but I feel like it could be there.
“So I'm happy I'm putting myself in a position like this in a fourth round of the French Open after not having played so many years here.”
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