The Spaniard lost in three sets to his compatriot Nicolas Almagro in the quarterfinals by 2-6, 7-6 (7-5), 6-4, ending his 41 game winning streak at the tournament, Xinhua reported.
He had not even dropped a set in the tournament since the 2008 final, and seemed cruising to his conquest of the title for the ninth time as he missed the 2010 version.
This was also the first victory for Almagro over Nadal in their 11-time meetings.
Nadal took the first set in a stroke and held five break points on the 11th game in the second set, but failed to convert any of them and gave Almogro a 6-5 lead and the tie on 1-1.
Both players held onto their serves for a 4-4 tie in the third before Nadal struck long and was broken, which resulting in his loss.