This is Nadal's first tournament since crashing out early at Wimbledon.
The world number 10 has decided to play on the Hamburg clay to ease himself back into competitive action ahead of the American hard-court season, leading up to the US Open in September.
Nadal, 29, may have a 13-2 career record lead over Verdasco but has lost their last two meetings.
This is the first time that Nadal will be playing in Hamburg in seven years and he is keen to get back to action on his favourite surface.
"I am very happy to be back in Hamburg, I haven't been here since 2008 so it's great to be back in such a nice city.
“I have great memories about this tournament," Nadal told www.atpworldtour.com on Sunday.
"I think probably defeating Carlos Moya in 2003 was a very important match for me at the time but also I remember very well the match against Novak Djokovic in 2008 which was very emotional," he added.
The 14-time Grand Slam winner will also be playing doubles, partnering up with 18-year-old Jaume Munar, who also comes from Mallorca.
"I feel good, there are no problems. I look forward to this week," said Nadal.