Nadal came out on top in the pair's most recent match in Monte Carlo
Rafael Nadal believes Andy Murray can take his world number one position.
Murray, 22 on Friday, became the first Briton to become world number three this week and has won three titles this year - in Doha, Rotterdam and Miami.
"He has the potential to be number one, and win important titles, which he's already done," said Nadal.
"If he's better than me at the end of the season then I'll congratulate him. If I'm number three then I'll be happy there because I'll have tried my best.
Murray replaced Novak Djokovic in the rankings after the Serb failed to defend his title at the Rome Masters earlier this month and is now behind Roger Federer, who occupies second spot.
He has won all 11 of his ATP titles on hard courts and is now looking to improve his game on his least favourite surface, clay.
The Scot has fared better on on the surface this season, reaching the last four of the Monte Carlo Masters before losing to eventual winner Nadal.
The Spaniard believes Murray will be difficult to stop if he attains the level he wishes to reach on clay.
"Sure, Murray can improve more on clay, and if he improves and plays a very good level it's going to be very difficult to stop him because on the rest of the surfaces he is very good," added 22-year-old Nadal.
Murray, currently competing at the Madrid Open, will be hoping for a good performance at the French Open later this month, where his best effort to date at the major came last year when he reached round three.