Nadal, a four-time champion in Madrid, had an easier time in the second set after earning an early break, and closed out the match with another at the end.
The Spaniard came through a tense final game, fending off a break point before converting his third match point and closing on a fifth Madrid title. I made a lot of unforced errors.
However, Thiem did manage to get the better of Nadal on clay in the 2016 Buenos Aires semi-finals; so it will be interesting to see how this match goes. Tomorrow is a day to try to give my best.
Nadal, a four-time Madrid champion, improved to 14-0 on clay this season and reached the final of the ATP World Tour Masters 1000 event for the seventh time in nine years.
Djokovic hasn't made the semi-final of any of the top-tier tournaments this season either, after winning Qatar Open before the Australian Open.
The Spaniard and four-time victor in Madrid got off to a dream start in the 50th meeting between the two great rivals, winning every point in the first game to break Djokovic, with the home crowd wildly celebrating his first point - a potent return which the Serbian could only hit into the ground.
"I think that the last two years perhaps haven't been my best two years".
Like many times this season or since the Wimbledon previous year, Novak shots were just not there, he was late on the ball, with no power or depth that could drove Nadal away from his comfort zone.
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The young gun built a promising foundation in Sunday's final and forced Nadal to a tiebreak in the first set before losing stamina in the second and struggling to keep pace with the king of clay from that point on.
Nishikori, who beat Djokovic in the 2014 U.S. Open semifinals, was playing in his first tournament since March.
"It's really important being able to make it to another final in a Masters 1000, especially here in Madrid, at home. To win against Novak by that score you have to be playing very well, otherwise it's impossible", said Nadal. "If you see his records on this surface, it's just awesome", said Thiem.
Both players were producing some brilliant winners but Nadal eventually took the breaker 10-8 when Thiem's usually trusty forehand flew just long to end a set which had lasted nearly an hour and a half.
"It was an important match for me because it meant continuing with the good dynamic that I've been carrying for several months", Nadal said. It was 13-9 for Rafa in the longest points, and this is another prove how good he played and how tough was for Novak to achieve some more positive result.
"We had to hit very close to the line to win the points", said Nadal, who is trying to win his third consecutive title after victories in Monte Carlo and Barcelona. "I'm very happy at the moment", Thiem added.
In an even first set, Nadal had to save two set points in the tiebreaker.