Federer is under increasing pressure from Nadal
Roger Federer's long reign as world number one is looking perilous after he crashed out of the Toronto Masters in his first match since Wimbledon.
Federer, who had a first-round bye, lost 2-6 7-5 6-4 to unseeded Frenchman Gilles Simon in the second round.
Nadal, however, had a 6-4 6-2 win over Jesse Levine and is getting ever closer to Federer's number one ranking.
Federer led the rankings by 1,445 points in January but if Nadal wins in Toronto it would be less than 300.
"The hard court season just started so it is not the end of the world but I wish I could have started better," said Federer, who has been at the top of the rankings for 234 weeks.
"I like this surface, I like this tournament, I have done well in the past here so it definitely hurts.
The first match is always tough, especially after one week off after Wimbledon
"I have to regroup and look forward. The bigger picture is the Olympic Games and the US Open and those are the places I really want to win so I have to make sure I am ready for that."
The Swiss star, seeking to reignite his season after the disappointment of losing the Wimbledon final to Nadal, won the first four games on the way to the opening set in Toronto.
But Simon, who won a tournament in Indianapolis on Sunday and is ranked 22nd in the world, battled back to beat the 12-time Grand Slam winner and reach the third round.
"I was playing like I was in a dream. I just saw the ball and hit it as hard as possible," said Simon.
"It is really unbelievable to beat Roger like this. I'm so confident actually because I won the tournament last week."
Nadal, also playing his first match since Wimbledon, was 4-1 down in the first set of a match delayed by six hours because of rain.
But the left-hander raised his game to break Levine four times in the match to extend his unbeaten run to 25
"The first match is always tough, especially after one week off after Wimbledon," said the Spaniard, who claimed his first career hardcourt title in Canada in 2005.
"I only had a few days for practice, it's important to think that I can come back and I won."
The 22-year-old faces Igor Andreev in the third round after the Russian upset 16th seed Tomas Berdych 6-4 3-6 6-4.
Nadal was joined in the third round by fourth-seeded Nikolay Davydenko, who defeated Tommy Haas 6-3 7-6 (8-6), and seventh seed James Blake who overcame Jonas Bjorkman 1-6 6-1 6-2.
Fifth seed David Ferrer beat Robby Ginepri 6-4 6-4, while Marin Cilic defeated 12th seed Tommy Robredo 6-3 6-4 and Dmitry Tursunov saw off sixth seed Feliciano Lopez 6-3 7-6 (8-6).
Marat Safin was a winner in his first round match against Sam Querrey, 6-3 6-3.