The opening set was a tight affair between the competitors, and Nadal came close to grabbing the first break, but Youzhny managed to hold on to save four break points.
Nadal eventually found the breakthrough, but his Russian opponent later responded by sealing a break of his own to take the set to 5-5.
A tie-break was eventually required to decide the opening set, and it was Youzhny who finished on top 7-4 to grab the lead in Rome.
Nadal, who is widely regarded as the 'king of clay', suffered a wobble in his opening service game of the second set - he managed to initially save four break points, but Youzhny eventually nabbed a break of serve.
However, the Russian was unable to maintain his dominance as Nadal forced the momentum to swing his way by securing three breaks of serve to level the set scoreline.
Nadal took control of proceedings in the third set by breaking Youzhny's first service game, which the Russian was unable to recover from as the world number one eventually cruised to victory.
The Spaniard will next face Andy Murray for the first time in three years.