The 18-year-old Shapovalov won the biggest match of his career, battled back from dropping the first set in 38 minutes before outlasting Nadal in a third-set tiebreaker.
"Probably my worst loss of the year because I lost against a player with a lower ranking". Ferrer upset 15th seed Jack Sock 7-6 (9/7), 3-6, 6-1. "I have another week in Cincinnati, and then I have a Grand Slam coming", he said.
Shapovalov entered the tournament ranked 143 in the world. Borna Coric actually went into the match leading the head to head 2-1, but a repeat of his shock victories in Basel in 2014 and Cincinnati a year ago never looked likely.
"He had a good start, I had a better finish", Federer told reporters after the match. But Shapovalov still did tremendously well to overcome the nerves he was likely feeling, and put in another great performance against a top player. In the decider, Nadal went up 3-0 to pile up pressure on the 2016 Wimbledon Junior champion, but Shapovalov fought back with two ravishing aces and then script an upset over Nadal, just putting his hope of becoming the Wolrd No. 1 on a hold.
Some people are calling it the biggest victory in Canadian tennis history. However, here he beat Brazil's Rogerio Dutra Silva in the opening round, followed it up with another win over Juan Martin Del Potro in the second before finally scalping Nadal. "He played with the right determination".
World number one Karolina Pliskova is through to the quarter-finals of the women's event in Toronto
Elsewhere Wednesday, France's Gael Monfils saved four match points before digging deep to defeat Japanese fifth seed Kei Nishikori in an attritional three-set duel. He aced it by downing the Argentine star 6-4, 7-6 (4), a win that gave him a lot of confidence ahead of Thursday's dream meeting with Nadal.
Dimitrov had won both of their previous meetings in straight sets, although this was their first encounter since 2014.
Federer lost just three points on serve in the first set against Polansky, who is ranked 117th, and he was never seriously challenged.
German Alexander Zverev also reached the quarter finals after he eased past Nick Krygios from Australia 6-4 6-3 and will take on Kevin Anderson from South Africa who also swept aside American Sam Querrey 6-4 6-3 to reach the next stage.
Pliskova will meet sixth seed and former world number one Caroline Wozniacki of Denmark in the last eight as she beat Poland's Agnieszka Radwanska 6-3, 6-1. It wasn't until he levelled the sets at one each that he realized he could beat the 10-time French Open champion. He came to within a point of taking, carving out a 30-40 advantage in Zverev's final service game of the match.
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