The two-time French Open champion has now won 67 matches on clay and never looked in danger of losing his two year unbeaten run on the surface as he joined Ilie Nastase as the only other man in open era history to win three successive titles in the principality.
Federer had won the last two meetings between the pair, in the Wimbledon final last year and for the season ending Masters Cup final but looked ill at ease from the opening game of the match.
The Swiss world number one had the opportunity to take the lead in the eighth game but he squandered three break points as Nadal produced a series of scorching forehand.
Monte Carlo Masters
Nadal claims first serve the key
22/04/2007 AT 17:17
The 20-year-old from Majorca immediately lifted his level after that scare to set up break points for himself in the very next game and took the lead for the first time in the match when Federer smacked a forehand long. Nadal then took the first set with a trademark cross court forehand winner after 47 minutes of play.
Federer, who played himself out of the match in the second half producing arguably one of his worst performances against Nadal, then dropped his serve again in the third game of the second set when Nadal summoned a stunning backhand passing shot from the middle of the court.
From then on it was a case of Nadal simply biding his time sealing victory in little over and hour and a half on his third match point when Federer sent a backhand well beyond the baseline.
Monte Carlo Masters
Fed: Rafa forces me to improve
22/04/2007 AT 16:39
Monte Carlo Masters
Rafa sets final date
21/04/2007 AT 16:18