Nadal had a chance to break Ferrero with the score at 4-4 in the first set but lost four points in a row.

He survived a set point in the next game but was eventually broken at 6-5 with Ferrero hitting a stunning backhand winner.

The world number two immediately called for treatment on his blistered foot and did so again with the score at 4-1 to Ferrero in the second set.

Nadal had lost his serve at 2-1 and, with his movement restricted, was unable to force his way back into the contest.

After his defeat Nadal explained that his participation in the match had been in doubt.

"Juan Carlos is a very tough opponent, but certainly if you're not 100% at a Masters Series event it is very tough," said Nadal.

"Today when I woke up, I said it was impossible to play. I spoke to the doctor today and yesterday and they put special protection on it and cream, but it was still tough.

"I congratulate Juan Carlos, but for sure that was not my best tennis."

Elsewhere, David Nalbandian and David Ferrer were both knocked out.

Argentine Nalbandian, the seventh seed, lost an exciting match against Spain's Nicolas Almagro 6-4 7-5.

Spanish fifth seed Ferrer won the first set against Radek Stepanek of the Czech Republic but ended up losing 4-6 6-2 6-1.