The Spaniard said in Paris that he would try to recover his fitness to play in London at an event he has never won.
But during his opening match of the tournament at the 02 Arena, Nadal said he knew his season was over.
“I was committed to the event. This is an event that I’ve missed too many times in my career but that’s how my career has gone,” said Nadal. “I can’t complain. I feel very lucky about all the things that have happened.
”I did all the things I had to do to be ready for London. I really fought throughout the match probably thinking it would be the last match of the season. It was a miracle to be so close in the match but it doesn’t make sense to play another match.”
Nadal battled against his recurring knee problems and an opponent who maintained his composure during his first appearance at the end of season tournament for the eight best men on the circuit.
The seventh seeded Belgian served for the tie at 5-3 up in the second set but offered up his fourth double fault to squander his chance.
The 26-year-old had a match point when Nadal served to level up at 5-5 but he sent a forehand wide.
Three consecutive match points followed when Nadal was attempting to make it 6-6. But the world number one reeled off a string of winners to take the set into a tiebreak.
Trailing 2-0 in the shootout, Nadal won six consecutive points before claiming it 7-4.
Even when he was down a double break in the decider, Nadal refused to yield. Goffin served to lead 5-1 but was pegged back to 4-3 before regaining control and taking the set 6-4 to record his first victory over Nadal in three meetings.
“I saw that he was struggling with his movement,” said Goffin. “Even if he was not moving 100 per cent, he was hitting the ball really hard. It wasn’t easy to finish a match against him.”
Goffin, who is the first Belgian to appear at the event, will play sixth seed Grigor Dimitrov and fourth seed Dominic Thiem in an effort to qualify for the semi-finals from the Pete Sampras group.
“It is the best win of my career but it is bitter sweet because it was against a Rafael Nadal who was not 100 per cent.”