Djokovic however dispatched of the Russian in straights sets in the final to claim his ninth Melbourne title in far more routine fashion than was expected at the Rod Laver Arena.
The Serbian kept his full 2,000 points as a result of defending his title and is 2,180 clear of Nadal in the ATP rankings.
Now an 18-time Grand Slam winner, Djokovic ended 2020 as No 1, topping the standings at the end of a calendar year for the sixth time in his career, with Nadal coming second.
That was the third straight year in which the pair have made up the top two of the rankings, with Nadal now on 20 Slams alongside long-time rival Roger Federer.
But before then, the world No 2 could drop down to No 3 – if Medvedev gets to the final of the Rotterdam Open which takes place March 1-7.
Nadal confirmed on Thursday: “It is with great sadness that I have to forfeit from Rotterdam. As most of the fans know, I suffered some back problems in Australia that started in Adelaide and continued during Melbourne.
“We found a temporary solution that allowed me to play without pain in the second week of the tournament.
“Once I got back to Spain I visited my doctor and together with my team they’ve advised not to play this upcoming week.
Moving to No 2 would see Medvedev become the first player since Lleyton Hewitt 16 years ago to rank in the top two, outside of the quartet of Djokovic, Nadal, Federer and Andy Murray.
Djokovic is unlikely to be caught at the top of the rankings any time soon though and he will overtake Federer for the most weeks as No 1 on March 8.
The field in Holland for the Rotterdam Open elsewhere includes world No 6 Tsitsipas, seventh-ranked Alexander Zverev and Andrey Rublev the world No 8.
British three-time Grand Slam champion Murray is a wildcard entrant but in addition to Nadal, the likes of Milos Raonic, Dan Evans, Gael Monfils, Matteo Berrettini, Denis Shapovalov and Pablo Carreno Busta have also pulled out.