The second-seeded Spaniard was brilliant from the baseline and the net, and proved too steady against an out-of-sorts Murray, who shouted at himself and whacked his leg with his racket as his frustrations boiled over in the first two sets.
In the fourth set, Nadal again unsteadied the volatile Murray, giving himself a chance to avenge a string of stinging losses to Djokovic this year.
Nadal beat Djokovic in last year's final but the Serb, who advanced with a thrilling five-set win over Roger Federer on Saturday, has beaten the Spaniard in five finals this year, including Wimbledon, to replace him as world number one.
"This year I'm not having a lot of luck against him. I have played him already in five finals and I lost all of them," 10-time Grand Slam winner Nadal told the Arthur Ashe Stadium crowd. "So hopefully, New York will help me this time."
Murray was out of step in the opening sets but flashed his great retrieving skills and athletic volleying to keep himself in the match. By the end he was undone by a rash of unforced errors, peppering the net with routine shots.
The Scot, a three-time Grand Slam finalist who was hoping to end a 75-year drought for a British men's Grand Slam winner, cracked 44 winners, 13 more than Nadal, but his 55 unforced errors was more than twice his opponent's total.
The Spaniard looked set to take charge early in the match, grabbing 0-30 leads in Murray's first two service games, but the Scotsman fought him off, leaving his feet to put everything into his strokes to keep the first set on serve before wilting under Nadal's constant pressure in the seventh game.
Unforced errors crept into Murray's game and the Briton yelled at himself after one glaring mistake before sending a forehand long to lose his serve and fall behind 4-3.
Nadal served out to claim the set 6-4 and stepped up his attack in the next set, breaking the Briton twice to take a two set lead, with Murray banging himself with his racket for not cashing in on three break points along the way.
Murray tried another tact in the third set, changing pace more often and engaging the hard-working Spaniard in longer rallies before seizing opportunities to go on the offensive.
Nadal and Murray traded service breaks early in the third set before the Briton broke in the eighth game and held serve to hand the Spaniard his first lost set of the tournament.
After fighting off two break points, Murray finally yielded the critical service break in the fourth game when he sailed a forehand long to fall behind 3-1.
The fight seemed to seep out of Murray, who had a tough four-set match against American John Isner on Friday, and Nadal broke the Briton again in the eighth game to end the three-hour 24-minute match.
"I was maybe going for too many big shots at the beginning of the match," said Murray. "Then the third and fourth sets I started being more patient and I started picking the right moments to come forward."
Murray said he intended to pick his spots against Nadal but was perhaps affected by his match with Isner in an Open schedule compressed because of back-to-back washouts this week.
"It's tough, because when you played a long match the day before, you need to sort of get a balance right," said the 24-year-old Scotsman.
"Anyone playing Rafa, you're gonna play a lot of long rallies. So if you can get some opportunities to try and shorten the points, then it would be good to do that."
At the very end of the match, Murray said he felt his back get stiff given a lack of rest in between matches.
"Obviously with playing three best-of-five matches in three days you're going to feel things sort of stiff and sore," he said.
"It wasn't ideal. Everyone in my half of the draw would say it wasn't ideal. But you just got to deal with it, because that was the situation we were in."
In the boy's tournament, Britain's Oliver Golding won his way through to the final after beating compatriot George Morgan 6-0 7-6(2) in an all-British last-four clash.
He will play Czech top seed Jiri Vesely, who beat a third Briton Kyle Edmund 6-4 6-2 in the other semi.