"I'm going to do my treatment, do my best to be playing in London, but I can not talk about that now because it is a day that is tough enough for me to pull out from here", Nadal said.
The injury has thrown his participation at the World Tour Finals at London's O2 Arena, scheduled to run from November 12 to 19, into doubt.
Nadal regained top form in 2017 after injury-plagued seasons in recent years, winning six titles, including his 10th Roland Garros trophy and third US Open crown.
"It's a tough situation but I tried my best", he added.
But knee problems, which have dogged his career, resurfaced in Shanghai last month, causing him to miss last week's tournament in Basel.More news: Why Everyone Thinks Kylie Jenner Is Doing a Gender Reveal Photo Shoot
He joins world number one Rafa Nadal, six-times champion Roger Federer, Dominic Thiem, Marin Cilic and debutants Alexander Zverev and Grigor Dimitrov in the eight-man event.
After his win over Uruguay's Pablo Cuevas, Nadal acknowledged on Thursday night that his knee was "not 100 percent fit", reports Efe. I know a lot of players talk about the season being too long, but I don't think that.
"And longer term, I'm going to do the treatment I believe that is going to be more safe and more important to keep playing tennis as long as possible".
The Serbian will go up against John Isner of the United States in the last four after the big-serving American beat Argentina's Juan Martin del Potro 6-4, 6-7, 6-4. "But being honest with the tournament, being honest with my opponents and being honest with myself, the way that I am today, I don't see myself playing three more matches here".
'I have to pull out, ' Nadal said at a press conference.