The Spaniard won his 12th slam title with victory over David Ferrer in the French Open final yesterday, becoming the first man ever to win eight singles titles at one tournament.
That moved him joint third on the all-time list level with Roy Emerson and behind only Pete Sampras on 14 and Federer, who remains five clear of Nadal.
At 27, Nadal is nearly five years younger than Federer, but for the past three seasons his only grand slam titles have come at Roland Garros.
Ferrer reached his first grand slam final in Paris but, like seven others before him, could find no way past Nadal on Court Philippe Chatrier.
He thinks it is possible for his countryman to beat Federer's mark, saying: "If he continues this way, who is to stop him? We never know what might happen in the future. But if someone can do this, it's good if it's Rafa."
Nadal, though, played down the prospect, saying: "Winning 17 grand slam titles, that's miles away from me. I'm not even thinking about it."
Nadal's incredible run of results since returning from seven months out with knee problems in February has brought him seven titles and 7,000 ranking points.
That is 1,970 points more than world number one Novak Djokovic, who sits second in the annual Champions Race, and Nadal has already qualified for the Barclays ATP World Tour Finals in London in November.
By a quirk of the rankings system, Nadal actually dropped a place on Monday to number five behind Ferrer, and he remains nearly 5,000 points behind Djokovic but, with nothing to defend after Wimbledon, the Spaniard will not be too far away from top spot if his great form continues.
He said: "Without playing Miami and without playing Australia, today I have 7,000 points on my computer. So that's much more than what I thought or what I dreamed.
"But to be number one in this era, you need to play during the whole season and do well during the rest of the season, because the rest of the players are very competitive. They're going to be there.
"I need to keep winning a lot of points if I want to have any chance to be number one at the end of the season.
"Everything went much better than what I thought so I'm in the position that, if I'm still doing things the right way, I'm going to have my chance to finish the year in a very good position in the rankings."
The great unknown is how well Nadal's knee will hold up over the rest of the season. So far eight of his nine tournaments have been on clay, his favourite surface.
The 27-year-old is encouraged by how he has felt over the past few weeks but he has not been able to train for the length of time he did in the past and will go into Wimbledon without having played a warm-up tournament after pulling out of Halle this week.
Nadal said: "Some weeks I didn't feel good, but the last couple of weeks I started to feel my knee is better. So that's positive. And the knee is resisting tough matches like I had in Rome against (Ernests) Gulbis, David Ferrer, two days straight.
"The knee resisted a very tough battle against Djokovic the other day. But I am still going week by week, day by day.
"I don't feel more fit than ever. I think that's not true. In other parts of my career I felt that I was more fit than what I am today. And it's normal, because I haven't practised as much as I did in the past.
"But when you are able to compete a lot of weeks in a row, that makes you improve. My practise was the matches during all this time. I was lucky that I won a lot of matches.
"Before I wanted to practise every day a lot to be 100 per cent sure that I am ready, but that's not possible today anymore. Hopefully it will be possible in the future."