Federer was the better player throughout yesterday’s decider but Nadal, who was looking to add the one major title that has so far eluded him to his year's collection of three grand slams, put up a brave fight despite clearly not being at his best physically.
Federer, who collected a cheque for just over £1million and 1,500 ranking points, said: “I've really enjoyed playing here this week, it's been a wonderful atmosphere. Rafa's had an amazing year, one any player dreams of.”
Nadal admitted he had lost to the better player, saying: “I want to congratulate Roger. He played unbelievable throughout the whole week. It was a fantastic year for me, probably the most emotional of my career.”
It was the 22nd meeting between the pair, who between them have won 21 of the last 23 grand slam titles, but the first since May's Madrid Masters final and only their fourth match in two-and-a-half years.
Nadal led 14-7 in the head-to-heads, but it was level at 3-3 on hard courts, while Federer had won both previous encounters at the end-of-season showpiece.
The big question was how well would the world number one have recovered from Saturday's three-hour epic against Andy Murray.
Federer, by contrast, had not lost a set in four previous matches this week and demolished Novak Djokovic on Saturday for the loss of only five games.
The early indications were that Nadal was feeling the effects of his exertions as Federer fired winners off his forehand and backhand, with the Spaniard left motionless.
Incredibly, this was the first final at this event played between the top two seeds since Lendl beat Boris Becker 24 years ago.
The body serve that proved so effective for Nadal against Murray was working well again, but there was a sense that the match was Federer's for the taking if he could play the big points well.
The first opportunity duly arrived with Nadal serving at 3-4 and Federer looked confidence personified as he casually whipped a backhand winner cross-court to break.
Often the 29-year-old has looked a little inhibited against Nadal, but not this time and he closed out the set to love with a pinpoint forehand winner.
The world number one had not won an indoor title since he was a teenager and he had a lot of work to do if he was going to add to that tally here.
Federer often has little lapses these days, though and a netted volley gave Nadal his first break points in the fourth game of the second set. One went begging, but on the second Federer drilled a forehand wide.
Nadal played intelligently for the rest of the set and after an hour and six minutes he had two set points. He promptly took the first when Federer made a late decision to come to the net.
It was an unlikely scoreline considering the world number one was still looking very weary, but there were signs of improvement in his movement and intensity at the start of the decider.
With five weeks until his next competitive match, Nadal could afford to give everything, but he found himself facing break point in the fourth game.
A brilliant Federer return put his great rival in trouble and a follow-up forehand left Nadal with too much to do.
The Swiss now had victory in his sights, but beating Nadal is as much a battle of the mind for Federer and he wobbled on serve before holding for 4-1.
With that hurdle overcome, the world number two set about challenging for a double break and he achieved it when Nadal, who now surely realised the game was up, netted a backhand.
The end, when it came after an hour and 37 minutes, was a little unfortunate as both players and the crowd paused to see whether Federer's forehand was in before the new champion was able to celebrate his 66th career title.
Meanwhile, Daniel Nestor and Nenad Zimonjic enjoyed a dream ending to their partnership as they beat Mahesh Bhupathi and Max Mirnyi 7-6 (8/6) 6-4 to win their second end-of-season doubles title.
The Canadian/Serbian duo, who were champions in 2008, followed up their victory over top seeds Bob and Mike Bryan in the semi-finals to lift the trophy.
The first set was dominated by serve before the second seeds finally edged it, saving a set point in the process. Bhupathi and Mirnyi, from India and Belarus respectively, beat their opponents on their way to victory at the Paris Masters two weeks ago, but this time it was Nestor and Zimonjic's day, with a single break of the Bhupathi serve enough to give them the title.
After three years with Zimonjic, Nestor will team up with the man he beat today — Mirnyi — in 2011.
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