Federer holds the record for Grand Slam titles with 17 and added his first ever Davis Cup title to his list of achievements last weekend.
"I think he is (the best of all-time), the numbers say so," Toni Nadal told Spanish radio station Cadena COPE.
"Federer is the best in the history of the game alongside Rod Laver and, unfortunately for us, it is like that."
However, Nadal has consistently had the upper hand on the world number two throughout their illustrious careers.
The Spaniard holds a 23-10 lifetime record over Federer and hasn't lost to him in a Grand Slam since the Wimbledon final of 2007.
"I don't know why that is. Federer's game doesn't affect Rafael as much. In any case, one is the best for the titles they win.
"Federer has won 17 Grand Slams, Rafael has won 14. He was number one for five years, Rafael for three. Therefore, there is no discussion, he is the best."
And he added that current world number one Novak Djokovic isn't far off the level of Federer and Nadal despite being someway behind in Grand Slam titles with seven to his name.
"Djokovic is a great player, for me he is almost at the level of Federer.
"He is very good, I don't know if he is better of worse than Rafael.
"In titles, Rafael is better than him. In terms of how they play, I don't know. At the end of the day everyone is free to have whatever opinion they want."