Fognini will face unseeded Serb Dusan Lajovic - another first-time Masters finalist - in Sunday's final.
Five weeks before the French Open kicks off at Roland Garros, Fognini produced some brilliant tennis on Monte Carlo's red clay to snatch his ninth ATP singles title.
Nadal toiled away for two hours, 20 minutes to win for the 71st time in 75 matches at the tournament. So when that happens, you have to lose. I was saying yesterday I was annoyed I had to play against him.
"I have this discussion with the chair umpire that I think he made bad decision, bad call. I am coming from low moments in terms of injuries, and in terms of the mental side have been not easy to accept all the things that have been going on during the last times", Rafael Nadal said.
Seeking a 12th title in Monte-Carlo, cracks were perhaps beginning to show in the previous round, as Nadal had to battle back from 4-1 down in the first set against Guido Pella, before eventually taking it on a tie break.
The 31-year-old world number 18 has lost 11 of his 14 matches with Nadal but is one of only seven players to have beaten the Spaniard on clay on more than one occasion.
"I was lucky to win the two games and to avoid the even worse score", Nadal said.
Pakistan militants execute 14 bus passengers
He termed the attack as "an act to build a conspiracy to halt progress in Balochistan and tarnish the state's image". He said that coordinated terrorist attacks in the country are hinting at the involvement of the enemies of Pakistan.
And that's what I needed probably to know that the half level, I have it. Yes, he could freeze on the big stage in his first Grand Slam final, and yes, Fognini could come on court and play lights out as he occasionally is capable of doing.
"It was my first time in the finals, so a great experience for me". And after one year and a half, without having the chance to play tournaments in a row and a lot of stuff happened, is more hard to hold sometimes the level every single day when you don't have confidence in tournaments in a row, no, or matches in a row.
I like Fognini to win his first Masters 1000 title.
Lajovic defeated Daniil Medvedev from Russian Federation 7-5 6-1.
That match was also played in distracting, swirling conditions, with Lajovic making a recovery from 5-1 down after changing strategy when Medvedev had the upper hand.
Nadal is usually the undisputed crowd favourite on the French Riviera, but shouts of "Fabio, Fabio, Fabio" rang out at the Monte Carlo Country Club.
"I was lucky at 4-1, he had two points to be 5-1 and with 5-1 it's nearly impossible", Nadal admitted.