The dream is over for the man from the village called fairytale.
An emotional Federer collected his seventh Grand Slam title and his second Australian crown, underlining his right to be bracketed with modern greats like American Pete Sampras.
But it was Baghdatis who stole the show over the past two weeks with his infectious smile, outrageous shot-making and band of raucous fans drawn from Melbourne's large Greek community.
"It was a dream come true, that's the only thing I can say," an exhausted Baghdatis told a news conference.
"It was a great dream."
Baghdatis's tale has been told many times over the past week, a story of being packed off from his home village of Paramytha -- which means "fairytale" in Greek -- to a tennis academy in Paris to learn his craft.
"It feels great because of all the tough work I've been through all these years and all the sacrifices my parents made for me," he said.
Baghdatis appeared to be heading for a finale worthy of the Greek myths when he raced to an early lead, up a set and a service break in the second set against the world number one.
CALF CRAMPS
Cramp struck in his left calf, most likely the result of stress after the Cypriot let the importance of the occasion get to him and allowed Federer to take control.
"I really played very well the first two sets," he said.
"Then I just started thinking and got a bit stressed out, stopped playing my game. I made some mistakes, gave the chance to Roger to come in and play his game and be aggressive."
Baghdatis's run had sparked wild celebrations in Melbourne, where dozens of chanting, flag-waving fans lent a soccer-style atmosphere to his matches, and back home in Cyprus.
Greeks and Cypriots packed restaurants and bars around Melbourne to watch the final. In Baghdatis's home village of Paramytha, shots were fired in the air and church bells were still ringing out half an hour after the match ended.
The 20-year-old reached the fourth round in Melbourne last year -- when he again fell to Federer -- but failed to make it past the first round in the three other grand slam tournaments.
Baghdatis, quoted by bookmakers at 330-1 to win before the tournament, beat 17th seed Radek Stepanek in the second round and then toppled second seed Andy Roddick in the fourth round.
Seventh seed Ivan Ljubicic was his next victim and then he fought back from two sets down to beat fourth seed David Nalbandian in an extraordinary semi-final on Thursday.
After all the heroics, his tournament ended in tears when he spoke to coach Guillaume Payre.
"He told me it's tough but it doesn't really matter because I'm 20 years old. He told me that I have a lot in front of me to do and it's not finished yet," Baghdatis said.
"After I started crying he said, 'Keep on crying'. That's all."