Australia's Hewitt defeated Benjamin Becker of Germany 6-7 (4/7) 7-6 (7/3) 6-2 to seal his place in the final and watched on as Federer, who has won on all his appearances in Halle since 2003, triumphed in the day's second last-four contest.
Swiss Federer, who has dropped to World No.2 for the first time since June 29, 2009, beat Germany's Philipp Petzschner 7-6 (7/3) 6-4 in one hour and 31 minutes for his 29th straight win at the grass-court tournament in northern Germany.
Federer won the event in 2003, 2004, 2005, 2006 and 2008. He did not play in 2007 or 2009.
It was the first meeting between the two and Federer suffered a surprise as he conceded two breaks in the opening set. However, he fought back and prevailed in the tie-break.
Federer secured the only break in the second set and served out the match to end Petzschner's resistance.
Federer, the reigning Wimbledon champion, will now meet Hewitt, the most successful active grass-court player, having won 97 and lost 23 matches.
The pair have met on 24 previous occasions, with the Swiss winning the last 15 meetings.
Federer leads the duel 17-7, including 3-1 on grass.
Hewitt, the 2002 Wimbledon champion, was beaten in the opening set today, as Becker edged a close first set before coming from 3-5 down to force a second set tie-break.
However, Hewitt won and the eighth seed claimed an early break in the third set before completing victory in two hours 23 minutes.