Federer, this year's third seed and a four-time winner in Melbourne, battled through a tough first set against Ivo Karlovic before capturing a 7-6 (8-6), 7-5, 6-3 win over the hard-serving Croatian. The 16-time Grand Slam champion had to save a set point in the first-set tiebreaker and did so with a lob over the 6-foot-10 Karlovic.
"I'm happy I found a way today," said Federer, who played his 998th career match on Friday. "[The] first set was crucial, like I said. [I'm] happy to be through in straight sets."
The second-seeded Nadal, who beat Federer for the 2009 Aussie Open crown, had little trouble in a 6-2, 6-4, 6-2 rout of Slovakia's Lukas Lacko. The 10-time Grand Slam champ has won each of his three matches in straight sets and hasn't yet faced a tiebreaker.
"I've played three matches at a very good level," Nadal said. "Today was one of the best. [It was] solid, without mistakes, [I was] comfortable with the serve [and] having good returns."
Things could start to get difficult for both men in the fourth round.
Federer, who had three days off before Friday's win because of a walkover in the second round, will be tested by Australian crowd favorite Bernard Tomic, while Nadal will square off against fellow Spaniard Feliciano Lopez.
Tomic, who rallied from two sets down to win his first-round match against Spain's Fernando Verdasco, went five again on Friday and advanced with a 4-6, 7-6 (7-0), 7-6 (8-6), 2-6, 6-3 win over 13th-seeded Alexandr Dolgopolov of the Ukraine.
The 30-year-old Federer and 19-year-old Tomic have met just once previously, a four-set win for the Swiss veteran in a Davis Cup World Group playoff last year.
As for Nadal, he'll take on a familiar opponent in Lopez. The two have met 10 times previously, with Nadal winning eight. Lopez needed five sets to advance on Friday, as the 18th seed outlasted American John Isner, 6-3, 6-7 (3-7), 6-4, 6-7 (0-7), 6-1.
"I hit great shots," Lopez said about his effort. "Sometimes I hit a little bit too much, too many double faults at one point, but overall I think I played great. I played great points."
Isner was the last American hope in Melbourne. It's the first time since 1973 that no American man has reached the round of 16 at the Australian Open. There were also no American men entered in 1973.
"It's very disappointing," Isner stated. "That's not a good effort from the Americans this tournament. I knew going in today I was the last one left and I wanted to keep on going, but just didn't happen. But it's very ugly, to be honest, to have no one in the round of 16. We've got to try to rectify that next time the big tournaments roll around."
Other winners Friday were seventh-seeded Tomas Berdych of the Czech Republic, 10th-seeded Spaniard Nicolas Almagro, 11th-seeded Juan Martin del Potro of Argentina and unseeded German Philipp Kohlschreiber.
Del Potro dropped a mere five games in a straight-set thumping of Taipei's Yen-Hsun Lu and will next face Kohlschreiber, who toppled Colombia's Alejandro Falla, 6-3, 6-2, 7-6 (7-3). Falla eliminated eighth-seeded American Mardy Fish in the second round.
Djokovic will battle Frenchman Nicolas Mahut with a potential fourth-round match against Hewitt on the horizon. Hewitt would have to beat Canada's Milos Raonic on Saturday.
The fourth-seeded Murray, who lost to Djokovic in last year's final and was also the runner-up to Federer two years ago, will meet Frenchman Michael Llodra. Ferrer, the fifth seed, will tangle with Argentina's Juan Ignacio Chela, while the sixth-seeded Tsonga will take on Portugal's Frederico Gil.