Nadal will regain the top spot on November 4 and is slated to hold the position even if Djokovic wins the Paris Masters which will offer him 1000 points on victory.
Federer saved five match points in the second set and received a point penalty in the third in the 6-3, 6-7 (7), 6-3 loss to fifth-seeded Alexander Zverev.
The defending champion from Serbia, a four-time winner of the Shanghai Masters who had reached the semifinals in all eight of his appearances at the tournament, lost to sixth-seeded Stefanos Tsitsipas 3-6, 7-5, 6-3 on Friday in the quarterfinals.
Top-seeded Djokovic is on a 24-0 sets winning streak in Asia dating back to last year's Shanghai Masters. He won his inaugural appearance at the Japan Open last week without losing a set.
Playing in the Japanese capital for the first time, Djokovic beat Australian qualifier John Millman 6-3, 6-2 in the final of the Japan Open on Sunday, marking the 10th time the Serbian has lifted a trophy on his main draw debut at a tour-level event.
Djokovic playfully tried to get one of them to budge and even said that he came close to doing so.
Eight teams among the 24 participating in the group stage, will advance to the knockout rounds, which will continue in Sydney until January 12.
Novak Djokovic was trailing Stan Wawrinka 4-6, 5-7, 1-2 when he decided to call it quits.
Novak Djokovic earned a 6-3, 6-4, 6-2 victory over Denis Kudla in the third round of the US Open on Friday.
Novak Djokovic fought pain to seal his 6-4, 7-6, 6-1 win over Juan Ignacio Londero while Roger Federer won 3-6, 6-2, 6-3, 6-4 against Damir Dzumhur in the second round of US Open.
Osaka, who beat Serena Williams in last year's final for her first Grand Slam title, recently regained the top spot in the WTA rankings from Ash Barty.
Novak Djokovic was handed a defeat in the semifinal of the Cincinnati Masters, as Daniil Medvedev set final clash against David Goffin.
World No.70 Andre Rublev defeated Roger Federer 6-3, 6-4 in the round of 16 of the Cincinnati Masters while Novak Djokovic sailed past Pablo Carreno Busta 6-3, 6-4 to reach the quarters.
Novak Djokovic cruised into the third round with a 7-5, 6-1 win over wild card Sam Querrey while Roger Federer made easy work of Juan Ignacio Londerom, defeating him 6-3, 6-4.
Serbia's Djokovic has collected 12,325 points atop the rankings, keeping a huge lead over the second-placed Nadal on 7,945 and third-placed Roger Federer of Switzerland on 7,460.
Four-time Rogers Cup champion Novak Djokovic has decided to give the tournament a miss.
Novak Djokovic won his fifth Wimbledon title defeating Roger Federer 7-6 (5), 1-6, 7-6 (4), 4-6, 13-12 (3) in a marathon final that lasted for more than four hours.
In the end, it was Djokovic who emerged victorious, coming back to edge Federer 7-6 (5), 1-6, 7-6 (4), 4-6, 13-12 (3) and become the first man in 71 years to take home the trophy from the All England Club after needing to erase championship points.
Live Wimbledon Final Match, Roger Federer vs Novak Djokovic: Watch live streaming of Wimbledon 2019 Finals between Roger Federer and Novak Djokovic live on Hotstar and Star Sports Select 1 in India and BBC1, BBC2 and the BBC Red Button in the UK.
London is gearing up for a Super Sunday as the 2019 World Cup and Wimbledon Finals are set to take place at Lord's and All England Club respectively and the good news is that there is no rain forecasted despite cloudy skies.
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