Nadal, a losing finalist to Roger Federer last year in Melbourne, will face Bosnia-Herzegovina's 28th seed Damir Dzumhur in the third round.
Nadal needs to reach the quarter-finals to be certain of retaining his world number one ranking after the Australian Open, with Federer breathing down his neck.
Rafael Nadal, who is gunning for a 17th major title but only his second Australian Open crown, was hampered by a knee injury at the tail-end of the 2017 season.
Djokovic made a winning return on Wednesday after six months out with an elbow injury, declaring he felt "great" after beating world number five Dominic Thiem.
World number one Nadal, who missed the warm-up Brisbane International last week with a knee injury, is set for just one appearance on Tuesday when he faces France's Richard Gasquet.
Reports casting doubt over Nadal's recovery from an injury to his right knee surfaced last week when he pulled out of an exhibition in Abu Dhabi this week and took at least four days off from practice.
The ex-minister from 2007-2010 alleged that Nadal had faked an injury in 2012, when he missed the final six months of the season due to knee problems, in order to hide a positive drug test.
Rafael Nadal pulled out of the ATP Finals on Monday, admitting he had lost his fitness battle after crashing to defeat in three sets to David Goffin in a thrilling encounter.
The ATP World Tour Finals feature the top eight fit male singles players and doubles teams that have accrued the most points throughout the 2017 season.
How to watch Rafael Nadal vs David Goffin, ATP World Tour Finals match live. Read all about live coverage and match action from The O2 Arena in London on November 14 (IST).
Roger Federer hasn't triumphed at the season-ending Tour Finals since 2011.
Rafael Nadal and Roger Federer get star billing in London after each won two Grand Slams and locked down the top two rankings spots as Novak Djokovic and Andy Murray had injury-plagued seasons to forget.
Rafael Nadal said on Friday he "hopes" to be ready for his opening match at the ATP Finals but admitted he has not been training at 100 per cent after an injury scare.
The 31-year-old became the oldest man to secure top spot in the end of season rankings.
The 16-time Grand Slam champion will take on world number 77 Filip Krajinovic in the quarters.
It is the fourth time the Spaniard has achieved the feat after 2008, 2010 and 2013.
Rafael Nadal reclaimed the top ranking in August for the first time in three years.
Roger Federer got one over his old rival Rafael Nadal to win the Shanghai Masters 6-4, 6-3 on Sunday in a showdown between the two best players on the planet