After 38 career meetings, Nadal leads the series 23-15, but Federer holds a slight 11-9 advantage on hardcourts.
The Spanish superstar, who has battled knee tendinitis and other injuries throughout his career, made it through a 7-6 (7/2), 7-6 (7/2) win over Karen Khachanov in the quarter-finals on Friday.
While Federer floated into Sunday's Indian Wells men's final (ESPN2, following women's final at 4 p.m. ET) without dropping a set all tournament, his two greatest rivals sputtered.
Just hours earlier Federer had looked forward to the chance to take on a healthy Nadal, after similar knee trouble spelled the end of the Spaniard's US Open campaign last year, and his US Open campaign last year. They've split wins, with Federer winning both of their hardcourt matches and Thiem winning once each on grass and clay.
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That included their most recent encounter, Federer's straight-sets victory in the Shanghai Masters final in October of 2017.
His run at the first Grand Slam of the year marked his return to competition for the first time since a similar knee problem forced him to retire from his US Open semi-final against Juan Martin del Potro in September.
However, Federer and Nadal got to this appointment in a completely different state.
"But at the same time, in the other hand, I went through fantastic moments and still going with that feeling a lot of times".
"I got on the golf cart back to the main building then Rafa texted me a message saying, 'It's not going to be possible, my knee's not well and I can't do it.' I went back to the house and relaxed. I'm excited to be in the finals but not this way".
"I know every one we have now could be our last", Federer said. I really hope not.