The 36-year-old won his eighth Swiss Indoors title on Sunday to reduce the points gap between the two long-time rivals to just 1,460 points but his subsequent withdrawal means Nadal needs only win on Tuesday morning to confirm the number one ranking going into 2018.
With 1,500 points available in London for the ATP World Tour Finals in London, it was thought that Federer and Nadal would go into a straight shootout for the top spot, but now Nadal only needs one win to put himself out of reach of the 19-time grand slam champion.
Andy Murray sealed his number one spot 12 months ago in the last match of the season against world number two Novak Djokovic but there will be no such drama this year, with Federer admitting his body needs to rest.
“My body is asking for a break,” said Federer, who has finished the year as world number one five times in his career, one less than record-holder Pete Sampras.
“Basel takes a lot out of me emotionally. I had five matches in six days. I feel sorry and sad for Paris.
“I'd like to be fully fit for London (the World Tour Finals) and for 2018.
“I did think about the ranking, but I'm so far back in the points race that it was almost out of the question.”
Nadal starts his Paris Masters campaign against young South Korean Hyeon Chung on Tuesday.