Nadal has not won a tournament title since July 2007

The Spaniard became the fourth seed to fall in the second round as Nikolay Davydenko, David Ferrer and Tomas Berdych were all beaten.

German qualifier Mischa Zverev pulled off the biggest shock when he defeated fifth seed David Ferrer 6-2 7-5.

Second seed Nikolay Davydenko fell 6-3 7-5 to Michael Llodra, while fifth seed Tomas Berdych lost to Ivo Karlovic.

The quartet of defeats mean there are no longer any seeds remaining in the competition - only the third instance since 2000 that an ATP tournament has had no seeded players in the quarter-finals.

Marcos Baghdatis, Britain's Andy Murray and defending champion Mikhail Youzhny were all knocked out in the opening round of the tournament.

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Nadal began the match in confident fashion, breaking Seppi's serve twice in the first set.

However, world number 42 Seppi - who had knocked out 2004 champion Lleyton Hewitt on Wednesday - fought back and celebrated his 24th birthday in style with a victory to saviour over Nadal.

"To beat Nadal like this is something special," said the Italian. "I played every point at 110%, this was one of my best matches."

Nadal - who has not won a tournament title since July 2007 - blamed his defeat on poor concentration.

"I started well today and took the first set playing fine tennis but then I somehow lost my concentration, so it was a bit of a mental problem."

"I can't explain how that happened but I kept fighting. I will not use the circumstances or the balls as an excuse as they were the same as yesterday when I won my first round match."

Davydenko, a semi-finalist in the last two tournaments, received treatment for an upper arm problem during the second set against the in-form Llodra, who won the Adelaide International title in January.

However it was Zverev's victory over last year's Masters Cup runner-up Ferrer that grabbed the headlines.

"This has to be my best-ever win," said Zverev. "I had expected to be home by tonight."

The 20-year-old faces the big-serving Croatian Karlovic - who beat Berdych 6-4 6-4 - in the quarter-finals.