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 Nadal lost to David Ferrer 4-6, 6-4, 6-3 in a match between Spaniards. A weary Djokovic lost to Richard Gasquet of France 6-4, 6-2 and was eliminated from contention for the semifinals with one match left in the Gold Group.
In the Red Group, top-ranked Roger Federer and No. 4 Nikolay Daydenko lost their first matches Monday and will play each other Wednesday, followed by Andy Roddick against Fernando Gonzalez.
Nadal, ranked No. 2, said there really are no upsets in this tournament, given the elite field.
"We play against the best always, every match, so anything can happen," Nadal said after his nearly three-hour struggle against Ferrer that divided the loyalties of Spanish fans, who draped national flags around the indoor arena.
"We have a very good relationship," Nadal said. "But when you are on court, you try your best."
Nadal held a 4-2 advantage in head-to-head meetings. Ferrer said his only advantage against the man he called the best player in Spanish history comes when they face off in video games.
"Just in the PlayStation I'm better than him," Ferrer said, laughing.
With Nadal a left-hander, the two men played like mirror images with their preference for the baseline, sharply angled winners and refusal to yield on shots.
Showing little respect for each other's serves, they combined for five breaks in the first set and 11 for the match. Ferrer didn't hold serve until his fourth attempt. Nadal finished off the set on Ferrer's 14th unforced error off his usually reliable forehand.
Ferrer pulled himself together and served for the second set at 5-3, only to be left muttering to himself after Nadal broke at love, the last three points coming on clean winners. But he shrugged it off to break right back the next game to even the match.
From 1-1 in the third set, Ferrer ran off four straight games. With both men breathing hard, Ferrer served for the match, only to see Nadal break and fend off a match point in his next service game to pull within 5-3.
Ferrer then held at love, finishing the match when Nadal tried a drop shot that hung up a little too long, giving Ferrer enough time to smack a backhand crosscourt winner before dropping onto his back in relief.
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"I was very nervous because I was a little bit cramping from the tension, from the nerves," Ferrer said of Nadal's last service break. "And Rafa is unbelievable. He's a fighter all the match. I play perfect in the third set. If I don't play perfect, I cannot beat Rafa."
Ferrer ran his record to 2-0 in the Gold Group, while Nadal fell into a tie with Gasquet at 1-1.
"Today I had nothing to lose," Gasquet said. "I just had to enjoy the moment to play in the Masters Cup and just to play my game. I did a perfect match. I played a lot of amazing shots with my backhand."
Djokovic, ranked No. 3, looked off in every phase of his game, overhitting his usually reliable forehand and having trouble with his strong serve to fall to 0-2. He started off listlessly and was increasingly disconsolate as the match wore on. He was mathematically eliminated from reaching the semifinals.
Djokovic said he had nothing left after playing more than 100 matches this year.
"Unfortunately again, I couldn't be even close to my level," he said. "I was frustrated because of that. I didn't feel so well physically, and mentally I just couldn't ... be so confident on the court. I didn't find any solutions."
"He was playing well, " Djokovic added. "He's a very talented player and he's playing smart."
Djokovic, who tossed his racket in frustration twice, won only six of his 19 service points in the second set and hit a backhand wide for his 27th unforced error on match point.
"I probably burned out a little bit and had too much pressure on me," Djokovic said, referring to his rapid rise in the rankings and the demands on his time off the court. "Of course, I know the cost. The biggest cost is that I'm really exhausted."
[Associated Press; By PAUL ALEXANDER]
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