Nishikori triumphed 6-2, 6-7 (1/7), 6-3 to become the first Japanese tennis medallist since Antwerp in 1920 when the country won men's silver and men's doubles silver.
Nadal, the 2008 singles champion in Beijing, was playing his 11th match in Rio.
But the 30-year-old did not go down meekly, fighting back from 2-5 down in the second set to push the play-off into a decider.
"I didn't know what to do from 5-2, I got a little bit tired and he started playing better. For sure I was rushing to win in the last couple of points," admitted Nishikori.
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Nadal won the doubles gold with Marc Lopez on Friday and then lost an epic three-hour singles semi-final to world number 141 Juan Martin del Potro on Saturday.
Nishikori had lost nine of his previous meetings against Nadal.
But he eventually proved too strong for the 14-time major winner who was playing in his first tournament in almost three months after a wrist injury forced an early withdrawal from the French Open.