The 31-year-old Spaniard assured himself the world No.1 ranking by beating Hyeon Chung 7-5 6-3 in the second round of the Paris Masters.
The 16-time grand slam winner had not finished the year at the top since 2013, with Novak Djokovic and Andy Murray doing so after that.
"One year ago, for sure I never dreamed about being No.1 again at the end of the season," Nadal said.
Nadal's comeback from injury, loss of form and confidence, has been remarkable.
He reached three grand slam finals this year, losing to Roger Federer at the Australian Open and winning a 10th French Open title before clinching the US Open for the third time.
"It was impossible for me to think about (being No.1) coming back from a tough period without playing, and with so many injuries in the last couple of years," he said.
"It means a lot. After almost 10 years since the first time."
The only downside to his remarkable season has been always losing to Federer, who leads the ATP Tour with seven titles this year.
Federer has beaten Nadal four consecutive times - not dropping a set in three of them - and the 19-time grand slam champion was in outside contention for the No.1 ranking before pulling out of Paris to focus on the season-ending ATP Finals in London next week.
Nadal was not at his best against the 21-year-old Chung, but was rarely tested.
Nadal, who is tied for a record 30 Masters titles with Djokovic, has never won the tournament in Paris. He will next face Pablo Cuevas of Uruguay.
Also, fourth-seeded Alexander Zverev lost to Robin Haase 3-6 6-2 6-2, and ninth seed John Isner beat Diego Schwartzman 7-6 (7-2) 6-7 (13-11) 6-3.
Haase next plays Juan Martin del Potro, who eased past Joao Sousa of Portugal 6-2 6-2 to keep his chances of making the London event alive.
Frenchman Lucas Pouille kept alive his slim chances of qualifying for London as well with a 6-3 6-4 win against Feliciano Lopez, but No. 12 Kevin Anderson's chances took a dent after a 5-7 6-4 7-5 loss to Spaniard Fernando Verdasco.
Photo: PHOTOSPORT Rafael Nadal