The 23-year-old unseeded Scot was beaten 16-21 21-16 21-15 in 70 minutes by the Canadian sixth seed.
Li has now won all four of their meetings, including the 2014 Commonwealth Games gold medal match.
Gilmour can be heartened by a good run of form in which she has climbed back into the world's top 40 following her lay-off after knee surgery.
She had an early lead against Li and then pulled away from 13-13 to take the opener on her first game point.
But Li responded in the second game, striking at 14-14 with a four-point surge and went on to level the match on her second game point.
It was the first game Gilmour had dropped in the tournament.
In the decider Gilmour recovered from 9-6 down to lead 10-9 before Li won five points in a row on her way to victory.
In the other semi-final Japan's third seed Aya Ohori saved four match points before beating South Korean fifth seed Jang Mi Lee 14-21 28-26 21-19 in 87 minutes.
Kirsty Gilmour lost to her old rival Michelle Li in the semi-final of the US Open in Anaheim on Saturday night.