The Spaniard has lost just three of his previous 62 matches this season, a record that has brought him nine titles out of a possible 12.
"With no doubt he's the best player in the moment this year," BBC Sport quotes Djokovic as saying.
"It's always the biggest challenge that you can have in our sport now. I mean, he's the ultimate competitor out there.
"He's fighting for every ball and he's playing probably the best tennis that he has ever played on hard courts."
Nadal leads Djokovic 21-15 in their head-to-head record as they get ready to meet in a sixth Grand Slam final.