At a packed Foro Italico in Rome, where Hollywood star Ben Stiller was among the VIPs, Wawrinka wowed the crowd on his way to a thrilling 7-6 (9/7), 6-2 victory to secure a semi-final match-up with compatriot Roger Federer on Saturday.
The winner of that match will meet either Serbia's Novak Djokovic, the top seed and defending champion, or Spain's David Ferrer, the seventh seed, in the final on Sunday.
Nadal remains the favourite for Roland Garros, the highlight of the clay court season which begins in less than 10 days' time in Paris and where he claimed his ninth French Open title last year.
But the Spaniard's defeat at such an early stage of the competition in Rome will have alerted his rivals to minor chinks in his clay court armour.
Nadal was stunned by Andy Murray last week as the Briton claimed victory in the final of the Madrid Masters.
But the Spaniard, who claimed he was handicapped by playing at night time when the ball bounces lower than during the day, ultimately took his hat off to his Swiss opponent.
“I'm not very unhappy at the way I played, but I think playing at night is not the best thing against a player like Wawrinka,” said Nadal.
“He hit every ball very strongly, but during the day bounces are higher and for me it's easier to put him a little bit more back.
“At night the ball is bit slower, the bounces are not that high, so he had the chance to go for it.
“He hit amazing shots in a lot of key moments… he played a lot of good points. I accept (the result), I can ony congratulate him.
“I've lost in the quarter-finals but I've had two weeks in a row playing well. Only once have I lost: in the final of Madrid, to Andy Murray.”
Wawrinka had beaten Nadal only once in their previous 13 encounters, notably trumping the 14-time Grand Slam winner in the final of the 2014 Australian Open, which is played on a synthetic surface.
But he belied his past record by matching — and surpassing —Nadal's formidable game on the red dirt with a rich variety of shots and movement
across central court.