By Steve Keating
The Briton, who must at least reach Sunday's final to keep his world number four ranking, produced his best effort of the week by defusing the previously red-hot Nalbandian.
It was Murray's first win over the 28-year-old Argentine, who had been on an 11-match unbeaten run since returning in July from a hamstring injury that sidelined him for two months.
"It definitely gives me confidence for the rest of the tournament and the rest of the U.S. stretch."
The Scot delivered an efficient display throughout the surprisingly one-sided contest, twice breaking the tenacious Nalbandian in the opening set before closing it out with an ace.
Murray broke again to open the second and never allowed the 2002 Wimbledon finalist a chance to get into the match, ending the rout in a compact 69 minutes with another booming ace.
"I was expecting it to be a very tough match and it wasn't. When you're out there, you're not really thinking whether it's comfortable or about how easy the scoreline is," said Murray.
"But he (Nalbandian) has been, over the last few years, one of the best at coming back from tough situations."
Murray arrived in Toronto without a coach having recently parted ways with Miles Maclagan but has quickly found his footing on the North American hardcourts.
The pair have clashed 11 times during their careers with the Spaniard coming out on top eight times.
This season they have one win each, Nadal subduing Murray at Wimbledon while the Scot advanced at the Australian Open following the Spaniard's retirement through injury.
(Editing by Tom Pilcher)