Alcaraz, ranked No.133 in the world, brushed aside Norwegian Casper Ruud, the No.3 seed, 6-2 6-4, and will face compatriot Jaume Munar on Sunday (AEST) for a place in the final.
Nadal was also 17 when he was runner-up in Auckland in 2004.
Australia's Lleyton Hewitt was just 16 when he claimed the 1998 Adelaide title.
Sunday's (AEST) other semi-final on the clay courts of Marbella will feature No.1 seed Pablo Carreno-Busta against Albert Ramos Vinolas.
That means a semi-final line-up featuring four players from the same country for the first time since Valencia 17 years ago, when once again Spain monopolised the places.