Nadal, the five-time French Open champion, was rarely troubled and beat Richard Gasquet of France 6-2, 6-4 to chalk up his 34th straight win at the clay-court tournament.
The top-ranked Spaniard remains on track for a fourth Monte Carlo final, having beaten Federer for the title from 2006 to 2008. Federer earned a comfortable 6-4, 6-3 victory over 15th-seeded Marin Cilic of Croatia.
"I think I was consistent and didn't allow him to get into the points he wanted to on my own serve," said Federer, who is seeded second.
Nadal has lost his last three finals -- once to Federer and twice against second-ranked Novak Djokovic -- and is without a title since winning the Japan Open in October.
He said he felt he was far more aggressive than he was against Finland's Jarkko Nieminen on Wednesday.
"I feel when I'm playing well with the forehand, is very important shot for me. So I can have the control of the point most of the time," said Nadal, who broke Gasquet's serve twice in each set. "When I am playing well with the forehand, everything is a little bit less difficult."
Nadal had a brief wobble when the 13th-seeded Gasquet picked up his form late in the second set, breaking the Spaniard's serve with a superb crosscourt winner from the back of the court to level at 4-4.
But Gasquet hurried his shots in the next game, going for spectacular forehand winners, and Nadal broke back.
Federer once again looked sharp, just as he did in beating Germany's Philipp Kohlschreiber in just 50 minutes in the second round. Federer won 79 percent of his first-serve points and 75 percent of the second, breaking Cilic once in each set.
"I'm mixing it up well, using kick serves, slider, hitting it hard enough, making sure that I don't have to maybe go through that many second serves," Federer said.
Murray ousted a hobbling Gilles Simon 6-3, 6-3. The Frenchman turned his right ankle jumping up to play a forehand from the baseline at the end of the first set and completed the match with the ankle heavily wrapped.
Murray was jeered by fans throughout the second set for playing several drop shots that Simon could not return.
"Well, you just got to deal with it. I wasn't doing anything wrong," Murray said. "I know every single player on the tour would have done exactly the same thing."
Simon agreed with Murray, adding that "even without my injury he would have won the first set." Simon is optimistic his sore ankle will heal within a few days.
Ferrer was far too experienced for 20-year-old Canadian Milos Raonic, winning 6-1, 6-3. The Spaniard dictated most of the rallies and pegged Raonic behind the baseline. The big-serving Raonic rarely threatened, managing only one ace and losing his own serve five times.