Garvan McGinley opens the scoring for the Fermanagh champions with 80 seconds on the clock before Kevin Cassidy kicks a wonderful score.
Kilcoo hit back with scores from Ryan McEvoy, Aaron Branagan and Paul Devlin.
Jerome Johnston, who scored 1-1 in the quarter-final win over Magherafelt, kicks a fine score to give Kilcoo a two-point lead at the break.
Devlin adds Kilcoo's fifth through a free before the Harps roar back with points from Garvan Jones (2) and Declan Cassidy.
GOAL! Aaron Branagan scores Kilcoo's goal to pull clear after 38 minutes! Derrygonnelly are slow to react to the Down side's free and are punished as Anthony Morgan tees up Branagan.
TWO RED CARDS! Derrygonnelly's Lee Jones and Kilcoo's Jerome Johnston both receive second yellow cards as both sides are reduced to 14 men.