However, the 23-year-old, who has only once before beaten the Spaniard, was not to be denied in Rome and produced a sensational performance to seal spot in the semi-finals. Nadal also had won the title in Rome seven times.
The 23-year-old will face the victor of the match between Juan Martin del Potro and Novak Djokovic.
And Thiem ultimately sealed only his second victory over Nadal by earning another break to prevail 6-4 6-3 in Rome.
Nadal meanwhile has proved resurgent with a run to the Australian Open final in January and had been yet to lose a match on his preferred surface this year.
Thiem nearly allowed Nadal back into the match but managed to cancel out three break points to go into a 5-3 lead and he broke again to take the match when Nadal sent a forehand long.
Although they were snuffed out, Nadal dug deep and profited from some rare Thiem errors to cut the gap, which was further reduced following a prompt hold.More news: Bill O'Reilly pays tribute to Ailes on podcast
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The younger player had been outplayed in the first two meetings between the two in 2017 but nevertheless drew plenty of plaudits as one of the form clay-court players around.
The German, who turned 20 last month, recovered from the blow of failing to serve out the opening set to win a tense tie-break against the 2016 Wimbledon finalist.
Isner next faces another big server in sixth-seeded Marin Cilic, who ousted ninth-seeded David Goffin 6-3, 6-4.
The other semifinal pits John Isner against No. 16 seed Alexander Zverev.
Isner prevailed 7-6 (7-3) 2-6 7-6 (7-2), with the help of 21 aces, to record only his second win against the Croatian.