Zeballos, ranked 73rd, bumped off the Spanish superstar 6-7 (2-7), 7-6 (8-6), 6-4 on the clay courts at Club Naval de Campo Las Silnas in Vina del Mar.
The result spoiled Nadal's comeback after a seven-month absence with a knee injury and garnered Zeballos his first career ATP Tour title in just his second-ever finals appearance.
The Argentine closed out the 2-hour, 46-minute battle with four straight points to hand Nadal just his fifth loss in 41 career clay-court finals.
Wisconsin business offering 'therapeutic cuddling' forced to close
Megyn Kelly: Santa Claus and Jesus are both white men