The Greek beat Nadal 6-4, 2-6, 6-3 in the final four to book just the second Masters 1000 final of his career against Novak Djokovic.
Tsitsipas became the youngest player ever, at 20 years and nine months of age, to claim wins over all of Roger Federer, Nadal and Djokovic.
The three-time ATP Tour titlist has a 100 per-cent record against Djokovic after beating the Serbian in their only previous meeting at the Canadian Open in Toronto last year.
But Djokovic is a different proposition this time around, having won both the US Open and the Australian Open since.
Djokovic has not won a title since Melbourne in January, going out early – at least by his standards – in Indian Wells, Miami and Monte Carlo and will be doubly keen to claim his 74th career title.
But Tsitsipas will hope to continue riding the wave of his win over Nadal, against whom he was 3-0 before their Madrid showdown.
On beating “You cannot imagine the relief. It’s unbelievable. I don’t want to say this, but it almost felt like I lost hope at some point.
“It was three [defeats] in a row. I felt in Toronto when I played him I was very close and this match kind of gave me a bit of confidence I can do bet in the future, but then it was too much.
“Really happy that I overcame this and dealt with it mentally. Beating him on clay makes it even more special, I think.
“It means the world, it’s really nice to be able to play this way, it’s an unbelievable feeling.
“I had to show mental discipline, and being tough and decisive in those crucial moments was key, I had to take all opportunities because Rafa is a fighter, he doesn’t give you many points.”
And Tsitsipas insists he must ensure he refocuses for his clash with Djokovic.
“I’ll have to be mentally prepared for Djokovic, I’m sure he wants the title as badly as me,” he added of the world No 1.
“I have never faced him on clay, so I don’t know what to expect. I have seen plenty of his matches, but I’m going to try to adapt to the way he is playing on clay as fast as I can because I’m pretty sure he is not easy on clay.
“I’m going to have to be mentally focused and also psychologically ready for a fight. That will be very important in tomorrow’s match.”
But Tsitsipas is confident of claiming his maiden Masters 1000 title in the Spanish capital.
He continued: “I’m more experienced [than when I played in the Rogers Cup final last year], more fit and experience plays a huge role in the way you are going to play.
“And more courageous. [I am] a more courageous Stefanos with more guts and mentally much tougher than I was the year before.”