Nadal missed the Australian Open due to a foot injury. In February, he lost in the semifinals of the first tournament he played, the Open 13 tournament in Marseille, France. Two weeks later, he handed Roger Federer his first loss of the year in the final of the Dubai Duty Free Men's Open (in 2006, Rafael Nadal and Andy Murray were the only two men who defeated Federer). To complete the spring hard-court season, Nadal was upset in the semifinals of the Pacific Life Open in Indian Wells, California, by James Blake, and was upset in the second round of the 2006 Miami Masters.
On European clay, Nadal won all four tournaments he entered and 24 consecutive matches. He defeated Federer in the final of the Masters Series Monte Carlo in four sets. The following week, he defeated Tommy Robredo in the final of the Open Sabadell Atlántico tournament in Barcelona. After a one-week break, Nadal won the Masters Series Internazionali BNL d'Italia in Rome, defeating Federer in a fifth-set tiebreaker in the final, after saving two match points and equaling Björn Borg's tally of 16 ATP titles won as a teenager. Nadal broke Argentinian Guillermo Vilas's 29-year male record of 53 consecutive clay-court match victories by winning his first round match at the French Open. Vilas presented Nadal with a trophy, but commented later that Nadal's feat was less impressive than his own because Nadal's winning streak covered two years and was accomplished by adding easy tournaments to his schedule. Nadal went on to play Federer in the final of the French Open. The first two sets of the match were hardly competitive, as the rivals traded 6–1 sets. Nadal won the third set easily and served for the match in the fourth set before Federer broke him and forced a tiebreaker. Nadal won the tiebreaker and became the first player to defeat Federer in a Grand Slam final.
Nadal injured his shoulder while playing a quarterfinal match against Lleyton Hewitt at the Artois Championships, played on grass at the Queen's Club in London. Nadal was unable to complete the match, which ended his 26-match winning streak. Nadal was seeded second at Wimbledon, but was two points from defeat against American qualifier Robert Kendrick in the second round before coming back to win in five sets. In the third round, Nadal defeated world No. 20 Andre Agassi in straight sets at Agassi's last career match at Wimbledon. Nadal also won his next three matches in straight sets, which set up his first Wimbledon final, which was against Federer, who had won this tournament the three previous years. Nadal was the first Spanish man since Manuel Santana in 1966 to reach the Wimbledon final, but Federer won the match in four sets 6–0, 7–6(5), 6–7(2), 6–3 to win his fourth consecutive Wimbledon title.
During the leadup to the US Open, Nadal played the two Masters Series tournaments in North America. He was upset in the third round of the Rogers Cup in Toronto and the quarterfinals of the Western & Southern Financial Group Masters in Cincinnati, Ohio. Nadal was seeded second at the US Open, but lost in the quarterfinals to world No. 54 Mikhail Youzhny of Russia in four sets.
Nadal played only three tournaments the remainder of the year. Joachim Johansson, ranked world No. 690, upset Nadal in the second round of the Stockholm Open 6–4, 7–6. The following week, Nadal lost to Tomáš Berdych in the quarterfinals of the year's last Masters Series tournament, the Mutua Madrileña Masters in Madrid. During the round-robin stage of the year-ending Tennis Masters Cup, Nadal lost to James Blake but defeated Nikolay Davydenko and Robredo. Because of those two victories, Nadal qualified for the semifinals, where he lost to Federer 6–4, 7–5. This was Nadal's third loss in nine career matches with Federer.
Nadal went on to become the first player since Andre Agassi in 1994–95 to finish the year as the world No. 2 in consecutive years.
Nadal started the year by playing in six hard-court tournaments. He lost in the semifinals and first round of his first two tournaments and then lost in the quarterfinals of the Australian Open to eventual runner-up Fernando González. After another quarterfinal loss at the Dubai Tennis Championships, he won the 2007 Indian Wells Masters, before Novak Djoković defeated him in the quarterfinals of the 2007 Miami Masters.
He had comparatively more success after returning to Europe to play five clay-court tournaments. He won the titles at the Masters Series Monte Carlo, the Open Sabadell Atlántico in Barcelona, and the Masters Series Internazionali BNL d'Italia in Rome, before losing to Roger Federer in the final of the Masters Series Hamburg. This defeat ended his 81-match winning streak on clay, which is the male open era record for consecutive wins on a single surface. He then rebounded to win the French Open for the third straight year, defeating Federer once again in the final.
Between the tournaments in Barcelona and Rome, Nadal defeated Federer in the "Battle of Surfaces" exhibition match in Majorca, Spain, with the tennis court being half grass and half clay.
Nadal played the Artois Championships at the Queen's Club in London for the second consecutive year. As in 2006, Nadal was upset in the quarterfinals. Nadal then won consecutive five-set matches during the third and fourth rounds of Wimbledon before being beaten by Federer in the five-set final. This was Federer's first five-set match at Wimbledon since 2001.
In July, Nadal won the clay court Mercedes Cup in Stuttgart, which proved to be his last title of the year. He played three important tournaments during the North American summer hard court season. He was a semifinalist at the Masters Series Rogers Cup in Montreal before losing his first match at the Western & Southern Financial Group Masters in Cincinnati, Ohio. He was the second-seeded player at the US Open, but was defeated in the fourth round by David Ferrer.
After a month-long break from tournament tennis, Nadal played the Mutua Madrileña Masters in Madrid and the BNP Paribas Masters in Paris. David Nalbandian upset him in the quarterfinals and final of those tournaments. To end the year, Nadal won two of his three round robin matches to advance to the semifinals of the Tennis Masters Cup in Shanghai, where Federer defeated him 6–4, 6–1.
During the second half of the year, Nadal battled a knee injury suffered during the Wimbledon final. In addition, there were rumors at the end of the year that the foot injury he suffered during 2005 caused long-term damage, which were given credence by coach Toni Nadal's claim that the problem was "serious". Nadal and his spokesman strongly denied this, however, with Nadal himself calling the story "totally false".
He had comparatively more success after returning to Europe to play five clay-court tournaments. He won the titles at the Masters Series Monte Carlo, the Open Sabadell Atlántico in Barcelona, and the Masters Series Internazionali BNL d'Italia in Rome, before losing to Roger Federer in the final of the Masters Series Hamburg. This defeat ended his 81-match winning streak on clay, which is the male open era record for consecutive wins on a single surface. He then rebounded to win the French Open for the third straight year, defeating Federer once again in the final.
Between the tournaments in Barcelona and Rome, Nadal defeated Federer in the "Battle of Surfaces" exhibition match in Majorca, Spain, with the tennis court being half grass and half clay.
Nadal played the Artois Championships at the Queen's Club in London for the second consecutive year. As in 2006, Nadal was upset in the quarterfinals. Nadal then won consecutive five-set matches during the third and fourth rounds of Wimbledon before being beaten by Federer in the five-set final. This was Federer's first five-set match at Wimbledon since 2001.
In July, Nadal won the clay court Mercedes Cup in Stuttgart, which proved to be his last title of the year. He played three important tournaments during the North American summer hard court season. He was a semifinalist at the Masters Series Rogers Cup in Montreal before losing his first match at the Western & Southern Financial Group Masters in Cincinnati, Ohio. He was the second-seeded player at the US Open, but was defeated in the fourth round by David Ferrer.
After a month-long break from tournament tennis, Nadal played the Mutua Madrileña Masters in Madrid and the BNP Paribas Masters in Paris. David Nalbandian upset him in the quarterfinals and final of those tournaments. To end the year, Nadal won two of his three round robin matches to advance to the semifinals of the Tennis Masters Cup in Shanghai, where Federer defeated him 6–4, 6–1.
During the second half of the year, Nadal battled a knee injury suffered during the Wimbledon final. In addition, there were rumors at the end of the year that the foot injury he suffered during 2005 caused long-term damage, which were given credence by coach Toni Nadal's claim that the problem was "serious". Nadal and his spokesman strongly denied this, however, with Nadal himself calling the story "totally false".