Roger Federer is working towards a third successive Australian crown and a 21st major victory.
Kevin Anderson struggled with an elbow injury early in the clash and couldn't cope with Tiafoe's power and finesse.
Novak Djokovic had won the three-day event earlier in 2011, 2012 and 2013 successively stamping his authority.
Marin Cilic took to Facebook to apologise to his fans and organisers of the tournament.
Second seed Federer suffered a painful loss at the hands of Anderson in the Wimbledon quarter-finals this year after leading by two sets.
World number three Roger Federer must beat South Africa's Kevin Anderson in his last group match to make the semi-finals.
Roger Federer is now in danger of failing to qualify for the semi-finals for just the second time in 16 appearances at ATP Finals.
Roger Federer and Novak Djokovic, along with six fellow tennis stars travelled to Westminster by the London Underground.
The last South African singles player to make it to the season-closing showpiece was Wayne Ferreira in 1995.
Alexander Zverev came from a set down to beat Kevin Anderson as the Europeans successfully defended the title won in Prague last year.
Team World slashed Europe's overall lead to 7-5 heading into Sunday's third and final day of the 2018 Laver Cup.
The doubles dream team of Roger Federer and Novak Djokovic lost their match but Team Europe still led Team World 3-1 after the first day of Laver Cup.
Nadal had recently lost to Novak Djokovic in the second-longest Wimbledon semi-final ever played.
Novak Djokovic added the 2018 title to his wins in 2011, 2014 and 2015.
Wimbledon Men's Final highlights, Novak Djokovic vs Kevin Anderson Tennis Match: Novak Djokovic became the lowest-ranked champion since Goran Ivanisevic in 2001 to lift the title for the fourth time.
And after a shattering quarter-final exit at this year's Roland Garros, which saw his world ranking slump to its lowest in 12 years, the Serb considered sitting out Wimbledon where he has been champion in 2011, 2014 and 2015.
The 31-year-old former world number one won the last of his 12 majors at the 2016 French Open when he completed the career Grand Slam.
The eagerly-awaited semi-final was halted just after 11pm (2200GMT) under a curfew agreement with Djokovic leading Nadal 6-4, 3-6, 7-6 (11/9).