Federer had an easier time in his quarterfinal, beating Juan Martin del Potro 6-3, 6-2 in just more than an hour for his fourth victory over the Argentine this year.
Top-ranked Victoria Azarenka defeated Angelique Kerber of Germany 6-4, 6-3 to reach the final of her sixth consecutive tournament. It was her 22nd straight victory to start the season, trailing only Martina Hingis' 37-0 start in 1997.
Second-ranked Maria Sharapova and Ana Ivanovic played the other semifinal later.
Nadal, ranked second in the world, handed No. 3 Federer one of his two losses since last year's U.S. Open when he beat the Swiss star in the Australian Open semifinals in January. They will play Saturday, when rain and wind is forecast to move into the Coachella Valley, spoiling the sun and 80-degree temperatures that have prevailed during the two-week tournament.
"I play always against Roger means a little bit more than against the rest of the opponents because I am playing probably against the best of the history," Nadal said, "so that's why it makes the match a little bit more special than the rest."
Federer improved to 37-2 with five titles since the U.S. Open. His other loss came in Davis Cup against American John Isner, who advanced to the other semifinal against top-ranked Novak Djokovic.
Despite all his success, Nadal said he routinely has doubts about whether he can win matches and that only arrogant people don't doubt themselves.
"I believe that it's going to be a very difficult match for me, and I don't know if I'm going to be able to play my best," he said. "But that's part of the game, and that's the beautiful things about the sport. I'm going to go there, I'm going to fight every ball and try to play my best tennis and I hope that's going to happen, but I don't know."
Nadal hadn't lost a set coming into the quarterfinals, but Nalbandian spoiled that right away. The Argentine was full of confidence, having earlier taken out Janko Tipsarevic and Jo-Wilfried Tsonga -- his first time beating two top-10 players at the same event since 2008. Nalbandian won the final three games to take the opening set.
The Argentine led 4-3 and 5-4 in the second before Nadal reeled off the final three games to take the set, breaking Nalbandian in the 11th game on a double fault.
"Nalbandian always gives me problems on my game, and that probably make me feel a little bit not safe before the match," Nadal said. "That's why probably I had more mistakes than usual."
Nadal broke three times in the final set, including at love to go up 5-2. Nadal served two love games and served and volleyed with success at times.
"I hit fantastic volleys," he said. "But it's something that I am not able to do it every time. Depends on the situation. I see the ball is a good slice serve; the opponent arrives like this; I go to the net. But before the serve I don't think I'm going to do serve and volley."
He had his first match point in the ninth game, but three consecutive errors helped Nalbandian close to 5-4.
Nadal faced two break points in the next game -- the first when he netted an easy smash after being run all over the court. He saved the second after Nalbandian missed a drop shot, then smashed his racket and yelled. Nalbandian tossed his racket after netting a forehand to give Nadal his second match point. The Spaniard closed it out after Nalbandian's backhand off Nadal's drop shot went wide.
The first game between Federer and Del Potro lasted 11 minutes. One of Federer's first serves was called good by a line judge, although both he and Del Potro believed it was out. Del Potro wanted to challenge, but the Hawk Eye line calling system temporarily broke down when an Internet connection was lost and data couldn't be provided.
As a result, the chair umpire supported the line judge's original call and Federer held on his way to building a 3-0 lead, including the set's only service break. Del Potro, who had two break points in the first game, argued to no avail.
"It was clear out and the machine doesn't work," he said. "But then the chair umpire told me he made a mistake ... could be a big chance to me to change the way of the match in that game. After that I was not concentrating and Roger was playing better, taking all his opportunities."
Federer has been fighting a cold during the two-week tournament, but it didn't seem to affect him.
He broke Del Potro twice in the second set when he led 5-1. Federer's backhand volley on his first match point missed wide. Del Potro had a break point when Federer netted another volley, but he got to deuce and then Del Potro netted a return of Federer's second serve on the Swiss' second match point.
"I sort of expected myself to come out and play a good match today after the struggle I had against (Thomaz) Bellucci," said Federer, who won that fourth-rounder in three sets. "I don't usually struggle back to back days, so this was for me a really good match against a great player."
Copyright 2012 by The Associated Press
