The world number 77 will take on Jack Sock in Sunday's final, after the American beat French wildcard Julien Benneteau 7-5, 6-2 to move within one win of a Tour Finals spot.
Krajinovic, who dropped out of the world's top 200 last year after surgery to remove an extra bone in his right wrist, dug deep to come through a deciding-set tie-break against the big-serving Isner, who struck 31 aces.
He is the lowest-ranked player to reach a Masters final since then-world number 191 Andrei Pavel in the French capital in 2003.
The 25-year-old reached the last four after world number one Rafael Nadal withdrew from the tournament before their quarter-final on Friday with a right knee injury.
"I was starting to play better and better and I broke the top 100 a couple years ago and then all of a sudden they saw that I had an extra bone in my wrist," Krajinovic told a press conference.
"It was mentally really tough because, you know, getting older and older, all sponsors, they said no to me.
"When I served for the match, my hand was shaking. It was tough to control the emotions, but I knew I had to stay aggressive all the way to the end. I did it, and (it's the) best day in my life."
Isner, 32, needed to win the tournament to grab the last place for the year-ending eight-man event in London from Spaniard Pablo Carreno Busta.
Now his compatriot Sock is the only man who can deny Carreno Busta.
Krajinovic saved three break points in his opening service game and grew into the contest from then on, breaking Isner in game five.
It was only the third time the world number 14 had dropped his serve in the tournament, and Krajinovic closed out the first set with a confident hold to love.
The Serb had only won two matches at Grand Slam or Masters tournaments in his career before this week, but he has claimed five second-tier Challenger titles in 2017 and will break the world's top 40 next week.
Krajinovic looked to be the fitter player, having had a day off due to Nadal's withdrawal, while Isner had been taken to a deciding set in all of his three previous matches.
But the giant American, runner-up in Paris to Andy Murray last year, found a second wind in a second-set tie-break, reeling off the first five points in a row.
He closed it out with two massive aces to take his tally for the match to 16.