Cilic, 28, had a chance to finish the match at 6-5 in his favor, but Lopez held on to his serve in the next two points to earn his first match point, which was later saved by the Croat.
"It's the best week of my career, I would say", Lopez told reporters following the match.
The Queens Club championship is one of the most prestigious and oldest grass court tournaments in the world.
Lopez was comfortably the better player in the decider, though, as he moved through to the final.
In the final, it will be another big-serving lefty in Feliciano Lopez.More news: Prince Harry once 'wanted out' of Britain's royal family
"It was tough to put that match out of my mind", Lopez said.
The tiebreaker proved captivating, and Lopez claimed the trophy with a 10-8 victory.
"I think the first set was the best I've played all week".
"For me, it's so special to be in the final", Lopez said, as quoted by ATP's official website. "I was serving for the match again".
He hit back to win the second set, but Cilic delivered the knockout blow with a break in seventh game of the final set and fittingly sealed the victory with an ace.
With his own serve still untouchable, that was all the advantage Cilic needed to close out the first set.
The Taiwanese-Chinese pairing did not face a single break point on their serve and converted four of eight to advance to the final against Australian fourth seeds Ashleigh Barty and Casey Dellacqua, who were handed a walkover in their semi-final against Sania Mirza of India and Coco Vandeweghe of the US.
This time Lopez got it done as Cilic's errant forehand in the third-set tiebreak ended the two-hour, 32-minute match. "I was mixing it up really well and just playing really smart in some critical points".