Cilic won the pre-Wimbledon warm-up event in bizarre circumstances last year when his final opponent David Nalbandian was disqualified for kicking an advertising board into the shins of a line-judge in frustration at losing a point.
The Croatian fifth seed is now just two wins away from becoming the first player to retain the trophy since Andy Roddick in 2005 after a dominant display against world number six Berdych.
Cilic will face former US Open champion Juan Martin del Potro or Australian veteran Lleyton Hewitt in Saturday's semi-finals.
The 24-year-old had lost four of his previous five meetings with Berdych and had never managed a grass court victory against a player ranked in the top 10.
But Cilic has a good record at Queen's and he edged a tight first set when he landed the only break of serve at 6-5.
Berdych's booming serve and huge groundstrokes can make him a formidable opponent on grass, as he proved in 2010 run when he reached the Wimbledon final.
The 27-year-old, back at Queen's for the first time since 2005, had not dropped a set in his opening two matches.
But Cilic, who brought an end to his nine-year partnership with Australian coach Bob Brett just before the recent French Open, has been in obdurate mood this week and never gave Berdych a chance to come back.
The second set went to a tie-break and it was world number 12 Cilic who held his nerve to seal one of his best wins in 2013.
Results from the fifth day of the ATP tournament at Queen's Club:
Marin Cilic (CRO x5) bt Tomas Berdych (CZE x2) 7-5, 7-6 (7/4)