Nadal, who has won three consecutive French Open titles, was going for his fourth straight title in Rome and had lost just one match on clay since 2005. But Juan Carlos Ferrero stunned Nadal 7-5, 6-1, breaking Nadal's serve three times and not giving up a break in the second-round match.
Eighth-seeded James Blake needed a third set but advanced over Andreas Seppi 7-6 (7-5), 3-6, 6-1.
Also Wednesday, Fernando Gonzalez, seeded 12th, won 6-3, 6-2 over Evgeny Korolev, but No. 13-seeded Juan Monaco was a 4-6, 6-1, 6-4 loser to Igor Andreev. Other winners Wednesday included Luis Horna, Simone Bolelli and Fernando Verdasco.