Thiem, the runner-up to the Spaniard in the 2017 Madrid final, had been the last player to defeat Nadal on clay at the Italian Open in Rome nearly 12 months ago.
He went on to snap John McEnroe's 49-set winning streak on the carpet in 1984 with a 6-3, 6-4 win over Diego Schwartzman of Argentina at the Madrid Arena.
Nadal went into the contest having won 50 successive sets on the red dirt since his loss to Thiem at the Internazionali d'Italia last May. "I think it has just been a match where he was better than me, same as a few weeks ago I was better than him. It was not my day".
"To be honest, I thought also myself that I was pretty far away before this week started". It's a tough question to answer, but I'd lean towards not a great deal. "That's what I'm working on", Nadal said. "Now I'm in the finals again, which is fantastic for me".
And Thiem was again clinical against the eighth-ranked South African, who was playing in a Masters 1000 semi-final for the first time in his career.
"I think from Shanghai till Monte Carlo, I hadn't finished a single tournament". Thinking too much about previous results is not going to do me too much good, outside of the fact that, sure, there was motivation to get through.
"I think that today I wasn't reading the ball well enough to be able to handle the situation, to put him in places where he didn't feel comfortable to play", explained a disappointed Nadal after the match.
He will now meet second seed Zverev - the man who knocked him out at the Rogers Cup - who beat John Isner 6-4 7-5. He played well and I didn't play well. Even though I played really different, I was returning very far back today. "It was a mini goal accomplished for me today". I am number three in the race of the year, which is the most important thing. We're not playing a game where the differences are big or massive.
Next up for Thiem is Kevin Anderson, who is a hard-to-believe 6-0 in the head-to-head series and 13-2 in total sets.
"Being honest, I am not - as I said a lot of times - when I am winning, I am not super happy, and when I'm losing, I'm not super sad".