The four-time Australian Open champion suffered a 6-2, 4-6, 2-6, 6-3, 7-9 defeat in a thrilling five-set quarterfinal match at Rod Laver Arena on Tuesday.
Nole extended his unbeaten run to 28 matches with a comfortable 6-3, 6-0, 6-2 victory over Fabio Fognini on Sunday. He next faces Stanislas Wawrinka.
World no.2 and defending champion reached the fourth round of the Australian Open beating Denis Istomin 6-3, 6-3, 7-5.
With temperatures surpassing 40 Celsius, Nole appeared content to expend as little energy as possible. He beat Leonardo Mayer 6-0, 6-4, 6-4.
Novak advanced to the second round of the 2014 Australian Open with a 6-3, 7-6 (2), 6-1 win over Lukas Lacko of Slovakia on Monday.
Nole features in four of top 5 Grand Slam matches of the year.
Tonight’s match-up was the 37th between the pair. Nadal won 6-2, 3-6, 6-4, 6-1 in three hours and 21 minutes.
The top two players in the world will go to No.1 on list of great rivalries in Open Era when they meet on Monday, beating Lendl/McEnroe and Connors/Lendl (36).
The top seed came back from a set down twice to beat Stanislas Wawrinka 2-6, 7-6 (4),
3-6, 6-3, 6-4 and reach his fourth straight final in New York.
Novak leads the Head2Head career record against the Swiss 12-2, having won the past 11 meetings.