Nadal defeated Stanislas Wawrinka in two tie-break sets to win his second game at the season-ending tournament, guaranteeing his place in the last four of the tournament in London.
Speaking afterwards, the Spaniard said: "There are a lot of emotions today. I was a bit lucky but I'm happy to be through to the semi-finals in the last tournament of the year.
"After missing this tournament last year, it's been an unbelievable comeback year.
"Being number one at end of the season is something really difficult as there are some unbelievable competitors out there."
Nadal won two Grand Slams this year at the French and US Opens. He has never won the season-ending Finals but is favourite to do so this year.