The tournament returns to traditional red clay after a controversial experiment with blue clay in 2012.
The surface drew strong criticism from Nadal and Djokovic who threatened not to return to play in the Spanish capital if it wasn't changed.
However, ATP president Brad Drewett outlawed the use of blue clay and so seven-time French Open winner Nadal and world number one Djokovic will return for another potentially fascinating clash.
Djokovic ended Nadal's eight-year reign as champion in Monte Carlo in the last Masters event a fortnight ago with such a devastating display that the Serb is now hotly tipped to become just the eighth man to complete the career Grand Slam and claim his first French Open title at Roland Garros.
Nadal bounced back to claim an eighth title at the Barcelona Open last week without dropping a set, but with Djokovic, Federer and Andy Murray all set to be in the draw this week, Nadal faces a much sterner test to lift his third title in Madrid.
Federer seemed to be the least concerned amongst the furore over the surface last year as in typically serene style he won the tournament for a record third time and he told the tournament's official magazine that he loves coming to Madrid, despite the home fans' obvious affection for his long-time rival Nadal.
"I enjoy playing in Madrid. They put up a great event, there is always a fantastic atmosphere when I play. Spanish people love tennis, Rafa is such a hero in Spain but I feel like they appreciate me and the other top players a lot as well and that is great," said the world number two.
Federer will return to action for the first time since losing to Nadal on the hard courts of Indian Wells back at the beginning of March as he took the availability of Monte Carlo being the only optional Masters event for the top players to continue training in Switzerland.
Murray will also look to get his clay court season up and running after a disappointing early exit to Stanislas Wawrinka in Monte Carlo.
The world number three, who won the tournament back in 2008 when it was played on a hard court, missed last year's event due to a back injury and has yet to reach a claycourt final.
In the women's event, reigning champion Serena Williams is once again the favourite.
However, the American could be usurped as world number one should Maria Sharapova win the tournament.
The Russian comes into Madrid in good form having won in Stuttgart last week, but since an early season wobble at the Australian Open where she was dumped out by teenage compatriot Sloane Stephens, Williams has looked imperious and hasn't been beaten since February thanks to wins at the Miami Masters and in Charleston last month.