Nadal arrived for the prestigious season-ending event knowing two Group A victories at London's O2 Arena would be enough to ensure he couldn't be caught by second placed Novak Djokovic in the race for the number one ranking.
The Spaniard achieved that aim in typically dominant fashion, beating seventh seed Wawrinka 24 hours after opening the tournament with a straight sets win over David Ferrer.
It is the third time Nadal has finished a calendar year in pole position in the rankings, and the first since 2010, and he celebrated with a jubilant jig around the court.
He is the first player to end a year at number one three years after his last season-ending top spot.
The 27-year-old's straight sets victory over Wawrinka also booked his place in the semi-finals of the Tour Finals, with one group match against Tomas Berdych still to come.
Nadal has insisted he isn't overly concerned about rankings these days, but his return to the top is a remarkable achievement given he only came back in February after seven months out with severe knee tendinitis that threatened to cut short his career.
Since his return from injury, Nadal has won the French and US Open titles, as well as eight other tournaments, and a maiden triumph at the Tour Finals would be a fitting end to such a memorable campaign.
Wawrinka has enjoyed the best season of his life, qualifying for the Tour Finals for the first time and winning his career-best 50th match of the year with a three-set victory over world number five Tomas Berdych on Monday.
But Nadal had won all 11 of his previous meetings with the 28-year-old, who had never even taken a set off the Spaniard.
Wawrinka played well for long periods here, hitting twice as many winners as Nadal, but he could never deliver the knock-out blow and 45 unforced errors proved his downfall.
A doubt-fault from Swiss in the fifth game of the first set gifted Nadal the first break of the match.
The usually indefatigable Spaniard began to show a few signs of tiredness as the set progressed and Wawrinka broke back as Nadal served for the set.
To his credit, Nadal refused to let his aching limbs get the better of him even when he trailed 5-4 in the tie-break.
He took the set in slightly fortuitous fashion as Wawrinka stumbled while attempting a routine volley, allowing Nadal to pick him off at the net.
Wawrinka knew he had missed a golden opportunity and he smashed his racquet in frustration before hurling it across the court.
The world number eight's anger surfaced again when he complained to the umpire about Toni Nadal, his opponent's coach and uncle, talking too much from his court-side seat.
It looked all over for Wawrinka when Nadal broke for a 3-1 lead in the second set, but the Swiss hit back with a break of his own in the seventh game.
Another tie-break was needed to settle it and Nadal once again rose to the challenge, racing into a 3-0 lead before holding off Wawrinka to seal the win.