In round three, the 18-year-old faced the Norwegian star on his home turf, emerging victorious to take the sole lead in the open section of the six-player tournament.
The 18-year-old claimed victory over China's Liren with the black pieces at the 2024 Tata Steel Chess Tournament on Wednesday, elevating him to the top spot and surpassing the legendary Viswanathan Anand.
Pragnanandhaa received a cheque for Rs 30 lakh for his performance at the 2023 FIDE World Cup, and entering the FIDE Candidates tournament, from the CM.
All the members of the Asian Games-bound Indian squad will compete in the tournament which will also see participation from former World Blitz champion Maxime Vachier-Lagrave and reigning World Champion Wenjun Ju.
"I feel very good to be in the finals, today I didn't win, but it's normal in chess," Praggnanandhaa told PTI from Baku hours after he finished runner-up.
Praggnanandhaa enjoyed an incredible run in the tournament, having beaten world No.2 Hikaru Nakamura and world No.3 Fabiano Caruana to set up a final date against Carlsen.
The second game of Classical Chess at the FIDE World Cup final between Indian grandmaster R Praggnanandhaa and Norway's world number one Magnus Carlsen ended in a draw
Praggnanandhaa, who had played out a draw with white pieces on Tuesday, held the Norwegian five-time World Champion Carlsen in Classical Chess to another draw