The 31-year-old must win the event in Acapulco – where he has been victorious on two previous occasions in 2005 and 2013 – to ensure that he does not lose further ground on his great rival.
The event is the first in which Nadal has competed competitively since he withdrew in the fifth set of his Australian Open quarter-final against Marin Cilic in January.
Nadal has 300 points to defend having finished as runner-up in 2017 after being beaten by American Sam Querrey in straight sets, with 500 on offer for the champion this week.
Federer, who became the oldest world number one in tennis history with victory in Rotterdam, is 345 points ahead of the 10-time French Open champion and is assured of holding onto the ranking until the first leg of the Sunshine Double at Indian Wells in March.
He will surrender 45 points – gained from his second-round exit at last year's Dubai Duty Free Tennis Championships – after opting to skip the event which runs concurrently to the tournament in Mexico.
But only a place in the final at the Abierto Mexicano Telcel will be enough for number one seed Nadal to benefit from that reduction, while winning the title for a third time could see him go to within 100 ranking points of the 20-time Grand Slam winner.
Rafael Nadal's projected route to the Mexican Open title
Round one: Feliciano Lopez
Round two: Thanasi Kokkinakis
Quarter-final: Sam Querrey
Semi-Final: Kevin Anderson
Final: Alexander Zverev
If Nadal can safely negotiate a clash with Lopez, who he has beaten in nine of their 13 career meetings, when he begins his campaign on Tuesday [27 February], then either qualifier Alexander Bublik or Australian Thanasi Kokkinakis would stand in his way in the second round.
Querrey, his conqueror from last year, is likely to be his quarter-final opponent, while another big-server in South Africa's Kevin Anderson or world number 10 Jack Sock could later stand between him and the final.
A stacked bottom half of the draw includes Alexander Zverev, Dominic Thiem, Kei Nishikori and Juan Martin del Potro, but the likes of four-time champion David Ferrer and Mischa Zverev will be hoping to make a run in the event.
Despite being billed as the pre-tournament favourite in Mexico, Nadal does not feel under any greater pressure to perform despite Federer being within his midst.
"I do not think or feel like a favourite to win the tournament, I do not have that inner pressure, I come to play, I have trained three hours daily," he told the media last week, according to the tournament's official website.
"I'll try my best, sometimes things go right or wrong and one must go prepared to accept both things, but at this point there is no pressure, but the personal demand to do things well."