The 20-year-old, who won his first ATP Tour trophy on clay in Hamburg in July, scored a 7-6 (7-5) 6-2 victory over an injury-hampered opponent.
After defying advice from his team to abandon his semi-final on Saturday, Berrettini, bothered by a foot problem, showed up for Sunday's title match and generally moved well but could not prevent Musetti getting his hands on the trophy.
Musetti's win at the hard court event saw him match Berrettini – twice a champion during the grass season – on two titles this year.
They are the only Italians with multiple ATP singles titles in 2022, with Musetti now increasingly close to joining compatriots Berrettini and Jannik Sinner inside the top 20.
This win nudges him a place to number 23 in the rankings, a new career-high position, and it made Musetti the ninth player on the men's tour to win a tournament this year without dropping a set at any point.
Speaking in an on-court ATP interview, Musetti said: "It was a really tough first set. Really long and we never broke.
"Matteo is a competitor; even if he was not 100 per cent physically, his capacity to stay until the end, to fight until the end, was a big problem for me to solve.
"Today I think I played not the best tennis, because I think we were both really emotional, really nervous and there was a lot of tension, but in the important moments I played better.
"It's really nice to be here with my family, with the crowd, and it's a really big win for me and an important moment for my career.
"I hope to enjoy and celebrate with great pizza. I will probably enjoy a Pizza Margherita for sure, like Napoletana."
A 6-2 7-5 win for Nadal over the Lithuanian qualifier carried the 35-year-old into the quarter-finals of the Melbourne Summer Set tournament.
Playing on Rod Laver Arena, the main show court for the upcoming Australian Open, top seed Nadal was tested by Berankis but came through unscathed, breaking serve to love to clinch the victory.
This was the first time that Nadal had faced Berankis, the world number 104 who briefly entered the top 50 five years ago, and it came as the 20-time grand slam winner battles back from the left foot injury that curtailed his 2021 season.
Nadal had not competed on tour since losing to Lloyd Harris in the third round in Washington in August, and the match practice he gained at an exhibition event in Abu Dhabi last month was followed by him contracting COVID-19.
He is vaccinated though, so was able to travel once he recovered from that brush with coronavirus, and is looking to build up form and fitness before the Australian Open begins.
"Honestly, I've been going through some difficult, challenging moments the last year and a half, but in general terms I'm super happy to be back in competition," Nadal said.
"It's important to start with a victory. It gives me the chance to play another time tomorrow and that's the main thing at this moment because I didn't play for such a long time.
"The main thing is being healthy. That's probably the only thing."
Awaiting Nadal in the last-eight stage will be Dutch player Tallon Griekspoor, who fended off Australia's Alexei Popyrin in three sets.
Determined not to take on too heavy a workload, Nadal has pulled out of the doubles tournament, despite making a winning start on Tuesday when he paired up with fellow Spaniard Jaume Munar.
He elected to play doubles initially to build up some rhythm. "In doubles, things always happen fast," Nadal said. "It makes you feel alive on the tour again. I think that was a positive thing."
Third seed Grigor Dimitrov advanced, seeing off Andy Murray's conqueror Facundo Bagnis in three sets, but Belgian fourth seed David Goffin slumped to a 7-5 6-3 loss against Slovakian Alex Molcan.
At the Adelaide International 1 tournament, there were wins at the last-16 stage for the top three seeds – Gael Monfils, Karen Khachanov and Marin Cilic – but fourth seed Frances Tiafoe was caught out by Australian Thanasi Kokkinakis, losing in three sets.
Top seed Nadal secured an opening-set bagel in just 30 minutes, but Nishikori hit back to force a decider before the 20-time grand slam champion prevailed 6-0 2-6 6-2.
Nishikori hit only three winners as he was blown away in the first set, but broke twice in the second to ensure Nadal was taken to three sets in back-to-back matches for the first time in this tournament – having overcome Ilya Ivashka in the second round.
The world number three saved three break points from 0-40 down in the final set and Nishikori saw another two come and go, with a more clinical Nadal breaking twice to advance.
Nadal will now face unseeded Brit Cameron Norrie, who also won the first set 6-0 and was 5-3 down to David Goffin in the second when the Belgian retired due to a leg injury.
Newly-crowned Monte Carlo Masters champion Tsitsipas defeated Alex de Minaur 7-5 6-3, stretching his straight-sets winning streak to seven matches.
Next up for the second seed is a meeting with Felix Auger-Aliassime, who beat fellow Canadian Denis Shapovalov 6-2 6-3, while Jannik Sinner beat Roberto Bautista Agut 7-6 (11-9) 6-2.
Andrey Rublev, Diego Schwartzman and Pablo Carreno Busta also made it through.
Two seeds fell in the Serbia Open, with Federico Delbonis taking out Dusan Lajovic 6-3 2-6 6-4 and Taro Daniel defeating John Millman 3-6 6-2 6-3.
Gianluca Mager moved into the quarter-finals at the expense of Alexei Popyrin and Aslan Karatsev battled past Aljaz Bedene 6-3 4-6 7-6 (7-5) in Belgrade.
A two-time champion of the event, top seed Nadal cruised past Spanish compatriot Pablo Andujar 6-3 6-2 on Tuesday.
In competitive action for the first time since the Australian Open, Nadal needed just 90 minutes to post his fourth victory in as many meetings with Andujar.
Zverev, the second seed at the ATP 500 tournament, survived an early battle before getting past Jason Jung 7-6 (8-6) 6-1.
Last year's runner-up, Zverev served 12 aces and broke four times in his victory.
Kyrgios beat Zverev in the final in 2019, but the Australian lasted just 31 minutes in the first round.
Ugo Humbert took the first set 6-3 when Kyrgios retired due to a wrist injury, the 24-year-old receiving some boos as he left the court.
Kyrgios was the only seed to fall as Felix Auger-Aliassime, John Isner, Grigor Dimitrov and Dusan Lajovic advanced at the hard-court tournament.
Taylor Fritz, Pedro Martinez and Kwon Soon-woo were also among the winners.
At the Chile Open in Santiago, seeds Juan Ignacio Londero, Federico Delbonis and Thiago Monteiro all got through their first-round matches.
Nadal this week appeared on the entry list for the first grand slam of the year, which begins on January 17.
The Spaniard has not featured on the ATP Tour since August, when he lost against Lloyd Harris at the Citi Open in Washington D.C.
But Nadal is going to be back into the swing of things in the next month. The Melbourne 250 starts on January 4 and will serve as a warm-up for the Australian Open.
Gael Monfils is headlining the ATP 250 event in Adelaide during the same week, while Novak Djokovic – whose participation at the Australian Open is as of yet unclear, although he is also listed for entry – is set to lead Serbia at the ATP Cup in Sydney.
Djokovic has not yet revealed his COVID-19 vaccination status. If he is not fully vaccinated, the 34-year-old may not be able to compete in Melbourne, barring a medical exemption.
Nadal has dropped down to world number six after another injury-hit season, in which he won two titles, triumphing in Barcelona and Rome.
He has only won the Australian Open once, in 2009, but has since been beaten four times in the final, in 2012, 2014, 2017 and 2019.
Since the start of the 2020 season, Nadal has played in four finals, winning them all, including last year's delayed French Open.
Nadal – playing his first competitive tournament since the Australian Open – produced some highlight moments as he saw off Miomir Kecmanovic 6-2 7-5 in Acapulco on Wednesday.
A two-time winner of the ATP 500 event, world number two Nadal was a class above against his Serbian opponent to stay on course for the title.
After his powerful display, the 19-time grand slam champion will face Kwon Soon-woo for a spot in the semi-finals after the South African beat eighth seed Dusan Lajovic 7-6 (7-2) 6-0.
Australian Open semi-finalist Zverev was bundled out of the tournament by American qualifier Tommy Paul 6-3 6-4.
Zverev dropped his opening service game and it was a sign of things to come for the German star as Paul capitalised to eventually claim the biggest win of his career.
Next up for 22-year-old Paul is fifth seed John Isner, who downed fellow American Marcos Giron 6-3 7-6 (7-4).
Grigor Dimitrov saved two match points as he prevailed 6-7 (8-10) 6-2 7-6 (7-2) against Adrian Mannarino in a thriller.
Mannarino erased Dimitrov's 4-1 lead in the final set to earn a pair of match points but the Bulgarian rallied to set up a showdown with third seed Stan Wawrinka, who eased past Pedro Martinez 6-4 6-4.
Elsewhere, fourth seed Felix Auger-Aliassime was surprised 6-4 6-4 by Kyle Edmund and Taylor Fritz topped Ugo Humbert 6-4 6-1.
At the Chile Open in Santiago, seeds Casper Ruud, Hugo Dellien and Federico Delbonis all moved through to the quarters but Pablo Cuevas fell to qualifier Renzo Olivo.
Nadal was in devastating form as the 19-time grand slam champion dismantled Kwon 6-2 6-1 at the ATP 500 tournament in Acapulco on Thursday.
After crushing Miomir Kecmanovic in the last 16, Nadal continued his ruthless path through the draw at the expense of the rising South Korean in one hour, 31 minutes.
Nadal – eyeing his third Acapulco title – hit 25 winners, 11 unforced errors and saved all eight break points he faced to set up a semi-final showdown with Grigor Dimitrov.
Bulgarian Dimitrov snapped a five-match losing streak against three-time major champion Stan Wawrinka by defeating the third seed 6-4 6-4.
Dimitrov – the 2014 Mexican Open champion – had not beaten Wawrinka since 2016 but the former world number three ended his drought in one hour, 25 minutes.
"I've played quite a few times against Stan and we've practised together so many times. Between us, it's mainly a mental battle," Dimitrov said. "I had lost the past five times against him, but those losses have inspired me. Those losses helped me. Even though it hurts saying it, I'm admitting it. I wanted to stand tall tonight."
John Isner – the fifth seed – booked his spot in the semis for the second successive year with a 7-6 (7-3) 3-6 6-2 win over fellow American Tommy Paul.
Isner fired down 22 aces to set up a clash against countryman Taylor Fritz, who topped Kyle Edmund 6-4 6-3.
At the Chile Open, in-form top seed Cristian Garin extended his winning streak en route to the quarter-finals in Santiago.
Garin – the Cordoba and Rio Open champion – celebrated his 10th consecutive victory by downing Alejandro Davidovich Fokina 6-2 0-6 7-6 (7-4) at the ATP 250 event.
Fellow seeds Albert Ramos-Vinolas and Thiago Monteiro also progressed but fifth seed Juan Ignacio Londero was upstaged by wildcard Thiago Seyboth Wild 7-6 (9-7) 6-4.
The Australian Open and French Open champion said after his Roland Garros triumph at the start of June that he would only appear at Wimbledon if he could compete without needing anaesthetic injections in a troublesome foot.
The 36-year-old said he was given a couple of injections before every match and announced he would undergo radio frequency injections in a bid to feature at the third grand slam of the year.
Nadal is halfway towards a potential sweep of the four majors, defying the foot trouble by producing results that few saw coming. Rod Laver in 1969 was the last man to win all four singles majors in a calendar year.
Spaniard Nadal was pictured by organisers of the Mallorca Championships on Thursday, during a practice session on one of the tournament's plush courts.
Nadal, who hails from the island, is reluctant to undergo major surgery to prolong his career.
Wimbledon starts on June 27, and it is a tournament that Nadal has won twice, in 2008 and 2010.
He leads the all-time list of men's grand slam singles title winners, with 22 to his name now, two more than Roger Federer and Novak Djokovic have managed.
That is still one fewer than Serena Williams has managed during her stellar career, and the 40-year-old American rolled in to London on Thursday for another tilt at Wimbledon.
Due to injury, Williams has not competed on the WTA Tour since last year's championships at the All England Club.
She has received a wildcard into Wimbledon, where she has been a champion seven times, most recently in 2016.
Williams posted a video on Instagram of her arriving in London with daughter Olympia.
She intends to compete in doubles at Eastbourne, partnering Ons Jabeur, in the week leading up to Wimbledon.
In an ironic development, given Nadal has been so plagued by his own serious foot problems, Tallon Griekspoor had to pull out of his scheduled clash with the 20-time grand slam champion on Friday.
That was perhaps not the news Nadal wanted, given the Spaniard is competing this week to gain much-needed match practice ahead of the Australian Open. It is his first ATP Tour event since August, when a long-existing left foot problem caused him to curtail his season.
Withdrawing from a Rod Laver Arena tussle with Nadal was a painful blow to 25-year-old Dutchman Griekspoor too, and he wrote on Twitter: "These are the matches you play for."
It would have been a first career meeting with all-time great Nadal for the world number 65, who instead faces a fitness battle before the first grand slam of the year begins on January 17.
Nadal will go on to face Finland's Emil Ruusuvuori, who won 6-2 6-1 against Slovakian Alex Molcan. The other semi-final on Saturday will see Bulgarian third seed Grigor Dimitrov tackle American qualifier Maxime Cressy.
At the Adelaide International, the top three seeds sauntered through to the semi-finals. Top seed Gael Monfils brushed aside Tommy Paul 6-4 6-1, number two Karen Khachanov saw off Egor Gerasimov 7-5 6-3, and third seed Marin Cilic was a 6-3 6-2 winner over Laslo Djere.
It was also confirmed on Friday that former world number one Andy Murray has been awarded a wildcard into next week's Sydney Classic.
Murray suffered a first-round exit in Melbourne and is looking for a run of matches before launching his campaign at the Australian Open, where he is a five-time runner-up.
Nadal, who has won at least one ATP Tour tournament in every season from 2004 onwards, will look to extend that streak into a 19th year after scoring a 6-4 7-5 win on Rod Laver Arena.
He has not captured a title in Australia since 2009, when he landed his only Australian Open triumph to date by beating Roger Federer.
Nadal will be a strong favourite against American qualifier Maxime Cressy in Sunday's final, despite being made to work hard to see out victory over 22-year-old Ruusuvuori.
The 35-year-old Mallorcan looked set for a routine win but dropped serve at 5-3 in the second set, allowing world number 95 Ruusuvuori a path back into the contest.
It provided Nadal with a test of resolve that he came through, tying up victory in an hour and 56 minutes, an encouraging sign as he continues to battle for full sharpness after a near five-month absence.
Nadal acknowledges he may not have long left in tennis, and he wants to make the most of the opportunities that remain.
"I just love what I'm doing," he said in an on-court interview. "I always feel passionate about the sport in general and I feel a very lucky person that I can live from one of my hobbies, tennis.
"I know it's not forever and it's not a job I'm going to do for 50 years, but I want to enjoy it as much as I can while I still have the chance."
The foot injury that caused the 20-time grand slam winner to curtail his 2021 season in August has not prevented him finding winning form this week and now Paris-born Cressy awaits, with the 24-year-old world number 112 enjoying a remarkable week.
Cressy was a 7-5 7-6 (11-9) winner on Saturday against Bulgarian third seed Grigor Dimitrov, serving 17 aces on the way through to his first ATP Tour final.
At the Adelaide International 1 event, Gael Monfils will face Karen Khachanov for the trophy.
Top seed Monfils ended the spirited run of Australian wildcard Thanasi Kokkinakis, earning a 7-5 6-0 semi-final win, while second seed Khachanov battled past former US Open champion Marin Cilic 7-6 (7-3) 6-3.
Top seed Nadal was too good for Dimitrov en route to his fourth Mexican Open decider, triumphing 6-3 6-2 in convincing fashion at the ATP 500 tournament on Friday.
Nadal won the event in 2005 and 2013 and the 19-time grand slam champion has the chance to claim a hat-trick of Acapulco titles after maintaining his relentless form.
"I'm very happy. A great victory against one of the best players in the world and a good friend," Nadal said. "I think I've increased my level during the match, so it's positive for me."
Spanish star Nadal recovered from 1-2 start, reeling off four consecutive games with some powerful baseline winners to seize control against seventh seed Dimitrov.
It was a similar theme in the second set as Dimitrov broke for a 2-0 lead but that was as good as it got for the Bulgarian – Nadal going on a six-game run to close out proceedings in one hour, 41 minutes.
Awaiting world number two Nadal in the final is Taylor Fritz after the American stunned fifth seed John Isner 2-6 7-5 6-3 in a stunning comeback.
"He's playing well. He has a great serve, fantastic shots from the baseline. It's going to be a tough one," Nadal said. "I know I'm going to have to be at my best and I hope to be ready for it."
At the Chile Open, second seed Casper Ruud defeated seventh seed Federico Delbonis 7-5 7-5 to book his spot in the semi-final.
Ruud – the first Norwegian to win an ATP Tour title in Buenos Aires – will next meet third seed Albert Ramos-Vinolas, who saw off Thiago Monteiro 6-4 6-4 in Santiago.
Top seed Cristian Garin was forced to retire due to a leg injury after losing the first set 7-6 (7-1) to Thiago Seyboth Wild, while Renzo Olivo upstaged Pablo Cuevas 3-6 7-6 (7-5) 7-5.
The Spanish great proved too good for Fritz 6-3 6-2 in just 74 minutes in the decider in Acapulco.
Nadal won the ATP 500 title for a third time and first since the event changed from clay to hard-court in 2014.
The 19-time grand slam champion did not drop a set at this year's tournament on his way to a first title of 2020.
Nadal only lost nine points on serve in his victory, while managing three breaks in a comfortable win over the American.
The 33-year-old grabbed a break in the eighth game of the first set before winning five straight in the second on his way to the title.
Only Jimmy Connors (109), Roger Federer (103) and Ivan Lendl (94) have won more ATP Tour titles than Nadal's 85 in the Open Era.
At the Chile Open in Santiago, Casper Ruud will face Thiago Seyboth Wild in the final.
Handed a bye for the opening round, third seed Khachanov made home advantage count in his first match as the Russian defeated Australian world number 50 James Duckworth 3-6 6-3 6-1 to reach the quarter-finals on Wednesday.
Khachanov – Olympic Games silver medallist, who triumphed in Moscow three years ago – will face another Australian, John Millman after he defeated Illya Marchenko 6-1 5-7 6-4 at the ATP 250 tournament.
"It always feel great to be back in your hometown, in a tournament where everything started for me as a professional tennis player," world number 31 Khachanov said.
"[This is] where I won my first matches, I got my first points. Since then, it's always great to come back home to see a crowd, [get] home support. It's also little bit more nervous, of course. But I always enjoy playing at home."
Khachanov was joined in going through to the last eight by sixth seed Marin Cilic – a two-time Kremlin Cup champion who overcame Tommy Paul 7-5 6-3.
At the European Open in Antwerp, top seed Jannik Sinner downed fellow Italian youngster Lorenzo Musetti 7-5 6-2 in the duo's first meeting as professionals.
"We never practice together, so it was kind of a new match," Sinner said post-match.
"He's an incredible player. He's a very great talent, so I hope we will have a couple of more matches on the pro tour, and obviously I'm very happy about my level today."
Arthur Rinderknech upstaged eighth seed Dusan Lajovic 6-3 4-6 6-2 to set up a quarter-final tie with Sinner, who is in the hunt for a fourth title of the season and a place at next month's ATP Finals in Turin.
Another emerging talent, qualifier Jenson Brooksby, bettered US Open quarter-finalist Botic van de Zandschulp 6-2 6-0, with Alejandro Davidovich Fokina sending third seed Cristian Garin packing 4-6 6-3 6-3.
A 6-4 6-4 loss came against a player he once led 13-1 in their career head-to-head, a gap which has now closed to 13-4 after a hat-trick of wins for Spanish left-hander Verdasco.
Following victories for Verdasco at the US Open and Shenzhen Open in 2018, the Madrid man again got the better of the two-time Wimbledon champion, beating the Scot on an indoor hard court for the first time after five previous defeats.
It was a tough draw for Murray, who also struck unlucky at the French Open last month when he was paired with former champion Stan Wawrinka in the first round and also lost in straight sets.
The former world number one had entered the Cologne event, a low-level ATP 250 tournament, in the hope of building up match practice and registering the wins he needs to improve his ranking, which stands at 115 after his battle with injury in recent seasons.
Marin Cilic and Gilles Simon won through to the second round earlier in the day at the German event.
At the St Petersburg Open, Belarusian qualifier Ilya Ivashka survived an on-court meltdown to beat French player Adrian Mannarino 6-3 7-6 (8-6) in the first round.
Trailing 3-2 in the second set, Ivashka insisted on taking a toilet break and was penalised a game on his return to court, for delaying the match.
Ivashka explained to the chair umpire he had asked for a medical timeout because he "wasn't able to stand on court", only to be told such a break could not be used for a toilet trip.
The red mist descended as a seething Ivashka shouted: "That is not possible. It is not possible."
The punishment meant the 26-year-old fell 4-2 behind in the set, but he managed to turn around the situation to progress to the last-16 stage, where Denis Shapovalov or Viktor Troicki will await.
At the same tournament, Russian Andrey Rublev began his first week as a top-10 player by scoring a comfortable 6-2 6-4 win over Canadian Vasek Pospisil.
Milos Raonic, who skipped the French Open where Rublev reached the quarter-finals, fired 21 aces in a 7-6 (7-5) 6-1 win against JJ Wolf.
In Italy, home player Lorenzo Sonego followed up his run to the fourth round of the French Open with a 6-2 7-6 (7-4) opening win over 18-year-old compatriot Giulio Zeppieri at the Sardegna Open.
Jarry, 27, had not made it through to an ATP final since his first and only title win at the 2019 Swedish Open, but the wait was worth it as the Santiago crowd treated him like royalty.
There were no breaks of serve in the opening set, and only one opportunity, but Jarry found himself a set down for the second match in a row after falling short in the tiebreaker.
But just like he did in his semi-final comeback against Jaume Munar, Jarry dug in and quickly ran out to a 3-0 lead in the second set.
It was short-lived, as Etcheverry rallied back to tie things up and force another tiebreaker, when Jarry turned around a 4-2 deficit and rattled off three important points in a row to gain the ascendancy, successfully serving it out to take things to a decider.
After posting an accurate first serve percentage of at least 67 per cent in each of the first two sets, Etcheverry fell apart in the third, landing only 36 per cent of his first serves fair, and winning just half (11-of-22) of his total service points.
Meanwhile, when it mattered most, Jarry's serve became overwhelming, winning 94 per cent (16-of-17) of his service points to slam the door shut on his Argentine challenger.
Fifteenth seed Dimitrov was too powerful for Italian wildcard Mager, beating him 7-5 6-1 in 74 minutes, and will face Yoshihito Nishioka or Generali Open winner Miomir Kecmanovic in the next round.
Nishikori, who has suffered with injury over the past 12 months, overcame Albert Ramos-Vinolas 6-4 7-6 (7-3) and could face three-time Grand Slam champion Stan Wawrinka if he defeats Lorenzo Musetti on Tuesday.
"I'm very happy to win," Nishikori said. "I think winning is most important for now. I need to get a lot of confidence. It's been a long time since the US Open last year. It isn't perfect yet, but hopefully one by one I'll get better.
"I tried to be aggressive when I could. He hits a lot of topspin balls, so it's not easy, but I tried to have good defence and good offence."
Hubert Hurkacz dumped out Great Britain's Dan Evans in three sets, while Marin Cilic overcame Alexander Bublik 6-7(7-4), 6-2, 6-4 to set up a meeting with sixth seed David Goffin.
Seeds Felix Auger-Aliassime and Karen Khachanov, meanwhile, slipped to defeats to Filip Krajinovic and Casper Ruud respectively.
The second round will see top seeds Novak Djokovic and Rafael Nadal in action after they were handed first-round byes.
Nishikori trailed 6-4 4-2 and was forced to break serve as Guido Pella attempted to close out the match in the second set, before sensationally rallying to a 4-6 7-6 (7-4) 6-2 win on Monday.
A two-time champion at the ATP 500 tournament on the Barcelona clay, Nishikori broke serve on three occasions in the final set en route to the second round.
"He had the match today at 6-5, serving [for the match]," said Nishikori. "He was much better in the first and second [sets] and 3-0 up in the tie-break. I don't know how I fought through. [In the] third set, I was playing much better.
"I was making so many unforced errors in the first and second [sets]. Maybe he got a little bit tired and I was playing strong in the third set. I want to take that to the next round… The way I fought today and the way I played in the third set was good."
Next up for 2014 US Open finalist Nishikori is 13th seed Cristian Garin.
Ilya Ivashka topped Tallon Griekspoor 6-3 6-1 and the qualifier's reward is a showdown with top seed and 20-time grand slam champion Rafael Nadal.
Cameron Norrie, Pablo Andujar, Jeremy Chardy, Pierre-Hugues Herbert, Jaume Munar, Federico Gaio, Egor Gerasimov and Bernabe Zapata Miralles all advanced to the last 32.
At the Serbia Open, seeds Filip Krajinovic and John Millman booked their spots in the round of 16.
With the ATP 250 tournament being staged for the first time since 2012 and headlined by world number one Novak Djokovic, Serbian fifth seed Krajinovic overcame Stefano Travaglia 7-5 5-7 6-3 in a Belgrade rollercoaster.
Millman – the Australian seventh seed – took down local wildcard Danilo Petrovic 7-5 6-4 as Marco Cecchinato and Nikola Milojevic won through.
Nishikori has been sidelined since August 2019 following surgery on a right elbow injury.
He won the first five games in Kitzbuhel and took the first set but Nishikori - a finalist at Flushing Meadows in 2014 - could not prevent Kecmanovic, coming off a second-round exit in New York, from producing a turnaround.
Kecmanovic claimed a 4-6 6-4 6-2 win but the former world number four took the positives from his display.
"I was not 100 per cent, but I was happy with the way I played," Nishikori said. "I was not fit enough and maybe if I finished in two sets it would have been different, as I had some chances.
"It's a shame, as I could have won today, but it was a good moment and I'm positive today. I was hitting the ball better in the altitude, so it wasn't easy, but I do like it. I'll try to be better prepared for next week."
Elsewhere in the draw, Hubert Hurkacz progressed to the second round with a straight-sets win over Joao Sousa, Guido Pella beat Yoshihito Nishioka and Sebastian Ofner overcame Radu Albot.
The Japanese player earned a 6-4 7-6 (7-5) triumph in a competitive contest against fourth seed Shapovalov on Sunday that lasted just under two hours.
Victory gave Nishioka his first trophy since the Shenzhen Open in 2018 and capped a memorable week that also saw him defeat top seed Casper Ruud at the ATP 250 event in Seoul.
Nishioka took a big step towards the second title of his career by breaking Shapovalov at a crucial moment when he was 5-4 up in the opener, both players having earlier saved break points.
His Canadian opponent was in the ascendancy after claiming an early break in the second set but Nishioka fought back from 3-1 down to force a tie-break and then won four of the first five points in the breaker.
Despite Shapovalov reducing the deficit, he was consigned to defeat when he sent a forehand wide, Nishioka dropping to his knees in delight after converting his second match point.
Shapovalov, a Wimbledon semi-finalist last year, has now lost in four consecutive ATP final appearances and still has just one career title to his name.
Nishioka, who will return to the ATP's top 50, eliminated fifth seed Dan Evans in the first round and later top seed Casper Ruud in the quarter-finals.
Meanwhile, Kovacevic made his main-draw bow on Monday, beating seventh seed Miomir Kecmanovic, and continued a sensational run all the way to the last four.
The American threatened another upset on Saturday, but Nishioka held his nerve to advance 6-3 4-6 6-3 in Seoul.
And now the Japanese will revert to the role of underdog on Sunday, with fourth seed Denis Shapovalov his opponent in the championship match.
Nishioka has only one ATP Tour title to his name, and he will have his work cut out if he is to add to that against Shapovalov, who is yet to drop a set this week.
The Canadian continued that sequence with a 7-5 6-4 success against Jenson Brooksby in the first semi-final.
