The Spaniard, seeking a 23rd grand slam title, once again recovered from losing the opening set to claim a 2-6 6-4 6-2 6-1 triumph at Flushing Meadows.
He will now face Richard Gasquet after extending his winning streak at majors in 2022 to 21 matches.
But he will hope the pain from a nasty-looking injury has subsided by then, with Nadal's racquet having bounced off the court and into his nose while he was stretching to make a return in the fourth set.
The world number three needed a medical timeout and treatment, returning with a plaster on his face as the incident ultimately did little to slow his momentum.
"It was just a strong hit," said Nadal. "At the beginning I thought I had broken the nose because it was a shock at the beginning. It was very painful.
"I lost a little bit of the feeling in my head. It was like being a little bit out of this world.
"I don't know, it seems like it is not broken. I am not sure yet. I don't know. I think it's getting bigger and bigger."
For the second match in succession, Nadal had to come from a set behind, having also lost the opener to first-round opponent Rinky Hijikata.
Having struggled to find his rhythm early on, the 36-year-old was pleased that his persistence paid off.
"I'm happy after a terrible start. I don't understand yet how I started that bad because the feeling before the match was good," he said, the win having secured his spot at the ATP Finals for a 17th time.
"But these kind of things sometimes happen, so you need to accept and keep going. That's what I did.
"I'm lucky that Fabio made some mistakes and I was able to start putting some balls in and finish the match playing obviously better, much better."
The eighth seed was outsmarted on No.2 Court as Fabio Fognini scored a 6-4 7-5 6-7 (1-7) 6-3 win to send Ruud home from the All England Club.
World number 94 Fognini cut a calm figure throughout, manipulating his opponent from the baseline before snapping past Ruud with ease at regular intervals.
The victory saw Fognini through to his seventh third-round appearance in 14 attempts at Wimbledon, where he next faces Robert Bautista Agut after the Spaniard downed Lorenzo Sonego on the same day.
"Maybe 14 is the lucky one," Fognini said during his on-court interview. "I was 5-2 up and the match was almost done but then at 5-4 too many things were coming into my head.
"But this is why I love and hate this sport. In the end he's top 10 and I'm 37 and today was a good present for me."
Ruud joined sixth seed Andrey Rublev as a surprise early elimination, and Tommy Paul was fortunate to escape a similar upset on No.3 Court.
The 12th-seed American moved into the third round by overcoming Finnish qualifier Otto Virtanen 4-6 6-3 5-7 7-5 6-4.
Paul will face Alexander Bublik in his next outing.
Data Debrief: Fognini proves age is no issue
Fognini, aged 37 years and 40 days, is the third player aged 37 or older to defeat an ATP top-10 player in a men's singles major event.
The Italian joined Ken Rosewall and Roger Federer as the only players to achieve the feat as Ruud's struggles on grass continued.
Olympic Gamed gold medallist and third seed Zverev fell behind a break in both sets but battled past Murray in straight sets at the ATP Masters 1000 tournament on Tuesday.
Tsitsipas – the second seed – rallied from a set down to vanquish Fabio Fognini in the desert, while fifth seed Berrettini was a third-round casualty.
ZVEREV CLAIMS COVETED SCALP OF MURRAY
Having already defeated Novak Djokovic, Rafael Nadal and Roger Federer in his career, all that was missing for Zverev was a win over Murray to complete the 'Big Four' sweep.
Zverev added Murray to his list of scalps with a 6-4 7-6 (7-4) victory to reach the Indian Wells fourth round for the first time since 2016.
The German star has now won 19 of his last 20 matches since Wimbledon.
"He's the only one of the Big Four that I hadn't beaten yet, so I'm happy that I've done it today," said Zverev, who will clash with 14th seed Gael Monfils in the next round. "Obviously it was a fantastic match.
"I thought Andy played extremely well, maybe as well as he's played since the surgery. I hope he continues playing the same way, because tennis did miss him for a long time and I think it's good to have him back."
TSITSIPAS FIGHTS BACK
It was far from easy for Greek star Tsitsipas, who prevailed 2-6 6-3 6-4 against 25th seed Fabio Fognini.
Tsitsipas added to his ATP Tour-leading haul of match wins this season, which now stands at 53 after Fognini had been looking to score his first victory over the French Open runner-up.
Alex de Minaur – the 22nd seed – awaits after he took down 13th seed Cristian Garin 6-4 6-2 for his first trip to the Indian Wells last 16.
BERRETTINI BUNDLED OUT
Wimbledon finalist Berrettini was no match for Taylor Fritz, who surprisingly topped the Italian 6-4 6-3.
Berrettini entered the contest as the only player on the ATP Tour this season to register double-digit wins on three surfaces – 15-4 (hard), 13-4 (clay) and 11-1 (grass).
"We're coming to the end of the year, I could really use a big result," said Fritz after claiming his first top-10 win of the year. "This is just what I needed, playing one of my favourite tournaments close to home."
