Despite having suffered with a stomach bug in the build-up to Wednesday's match, Nadal was dominant as he secured a 6-3 6-3 success in the Spanish capital.
The 17-time grand slam champion, who has won the Masters 1000 event a record five times, now faces a last-16 showdown with Frances Tiafoe.
With the roof on Manolo Santana Stadium closed following a spell of rain, it took a little while for Nadal to hit his stride.
His 18-year-old opponent, who overcame Denis Shapovalov in his opening tie, provided stern resistance.
Indeed, Auger-Aliassime proved to be the primary aggressor in the early exchanges, but a tally of 30 unforced errors took its toll.
He was also broken at a crucial juncture in the first set, Nadal the beneficiary of some loose Auger-Aliassime forehands as he was left to serve out the set.
The Spaniard carried that momentum into the second, winning the first two games as Auger-Aliassime struggled to cope with Nadal's pinpoint strokes and dominant court positioning.
Auger-Aliassime was already a double break down before he picked up a game against Nadal's serve, but that only delayed the inevitable as the world number two completed the win in a mammoth final game.