The Spanish world number two overcame Greek champion, Stefanos Tsitsipas 6-4 4-6 6-2.
Nadal is into the semi-finals at this event for the sixth time as he continues his pursuit of a maiden title at the year-end championships.
The ATP Finals is the one major title Nadal is yet to win, and he has given himself a chance to finally add it to his tally, having lost in the 2010 and 2013 finals. He has made six semi-finals and two finals in 10 attempts without getting his hands on the season-ending prize. Roger Federer has won six times, and Novak Djokovic five.
Nadal is fresh from his historic grand slam victory at the French open where he went on par with Roger Federer as the player with the most grand slam wins in their career.
The ATP Finals is the second highest tier of annual men's tennis tournament after the four Grand Slam tournaments. The week-long event, the tournament is held annually each November. The ATP Finals are the season-ending championships of the ATP Tour and feature the top eight singles players and doubles teams of the ATP Rankings. Roger Federer holds the record for the most singles titles with six.
There are eight players, and playing is mandatory except for injury or other good cause.
Qualification is as follows:
(a) the top seven players in the ATP rankings (b) up to two grand slam winners ranked between 8 and 20 (in order of ATP ranking, if any such players exist) (c) the next players in the ATP rankings, until the quota of eight is reached.
Nadal, 34, the 20-time Grand Slam champion will play Russian Daniil Medvedev in the semi-finals on Saturday.