The Spaniard now has a 50-50 chance of being in the same half as Djokovic and thus could meet him in the semifinals, BBC Sport reported.
Had he been second seed, rather than Federer, he could not have met the defending champion before the final.
The women's seedings reflect the world rankings, so Serena Williams is 11th and Britain's Johanna Konta 19th.
Wimbledon seeding is different from the other Grand Slams in that it does not always follow world rankings and is affected by grass-court performances.
Nadal said it "doesn't seem right" when asked about his likely seeding behind eight-time champion Federer for the championships, which begin on Monday.
Last year's finalist and world number eight Kevin Anderson is seeded fourth, and John Isner moves up to ninth after his run to the 2018 semifinals.
Anderson's elevation to fourth seed means Dominic Thiem, Alexander Zverev and Stefanos Tsitsipas all drop down one position in the seedings compared to their world ranking.
Britain's Kyle Edmund, the world number 31, is the 30th seed while British duo Jamie Murray and Neal Skupski are seeded 10th in the men's doubles.
French Open champion Ashleigh Barty tops the ladies' seedings for the first time at a Grand Slam, with Naomi Osaka second and defending champion Angelique Kerber fifth.
The women's seedings follow the WTA ranking list but changes can be made for a 'balanced draw', which is the reason seven-time champion Serena Williams – ranked 183rd before last year's championship – was seeded 25th in 2018.
It does not seem logical at first glance that men and women are seeded differently, but this is a result of separate agreements with the ATP and WTA Tours.
Employing a special formula has merit when you consider the short nature of the grass-court season, and the fact some players really struggle to live up to their ranking at Wimbledon.
But it can also throw up some interesting scenarios, such as Kevin Anderson's promotion to number four.
Last year's runner-up has the pedigree of a fourth seed, but has only been able to play two matches in three months owing to an elbow injury.