After nine months out of the game with a career-threatening knee injury, Nadal returned to win two Grand Slams and to finish the year as World No.1, making the biggest tennis story of 2013, reports Xinhua.
The Spaniard is looking to become the first man in Open Era to win every Grand Slam at least twice while he will also be hoping to move closer to Roger Federer's record of winning 17 Grand Slams, currently holding 13.
Australia's Rod Laver is the only player to have won all the four the Grand Slam titles twice.
Djokovic has already made Melbourne Park his own Grand Slam by winning four titles in the last five years. The Serbian is now aiming to win the title for a fourth consecutive year and hoping for a fifth triumph which would surpass the record he currently shares with Federer and Andre Agassi.
Djokovic finished the 2013 with an unbeaten run through the World Tour Finals and two Masters events in Shanghai and Paris and now is on a 24-match unbeaten run.
In view that Djokovic and Nadal shared three of the four Grand Slam titles as well as eight of the nine Masters titles in 2013, this year's Australian Open appears to be a straight shootout between the two.
Djokoivic beat Nadal in straight sets in their last two encounters in 2013 -- in China Open and ATP Tour Finals in London -- and the hard courts in Australia is the surface best suited to Djokovic's game.
However, Nadal can never be written off as the Majorcan returned in his possibly best season ever, winning 10 titles including the French and US Open to answer his doubters.
Nadal certainly has the tougher draw with Australian talent Bernard Tomic first and possibly Jual Martin del Potro in quarterfinals, who beat him at the Shanghai Masters last October.
Nadal returned to win two Grand Slams after career-threatening knee injury
Andy Murray is the third favourite for the title. The Briton won the 2013 Wimbledon to become the first male British winner in 77 years. He also reached the final in Melbourne three times but failed each time, including last year when he lost to Djokovic in four sets.
But the fourth seed is not match fit as he took a back surgery in September. He returned in Qatar but lost to German Florian Mayer in Round 2, which means he will go into this year's first Major having just played two exhibitions and two ATP Tour singles matches.
Last year was a bad one for Federer as the Swiss legend won just one title and failed to reach the final of any slam, which was the first time for him since 2002. He also dropped out of the top-5 and suffered a shock defeat to Lleyton Hewitt in the final in Brisbane last week.