Dodig, who picked up his first career Tour title in Zagreb earlier this year, outlasted the 10-time Grand Slam champion in 3:08, earning an unlikely 1-6, 7-6 (7-5), 7-6 (7-5) victory. Nadal won this event in 2005 and 2008.
The world No. 1 Djokovic handled former top-five Russian star Nikolay Davydenko 7-5, 6-1 in 1 hour, 35 minutes on the hardcourts at Uniprix Stadium.
Djokovic captured the former Canadian Open in Montreal back in 2007.
This marked Djokovic's first match as the ATP's top-ranked player. The Serbian star captured his first Wimbledon crown last month and now has a sizzling 49-1 match record, including eight titles already, in 2011.
The third-seeded Federer handled Canadian wild card Vasek Pospisil, 7-5, 6-3, in 1 hour, 17 minutes. The French Open runner-up Federer was last year's Rogers Cup runner-up to British star Andy Murray, in Toronto.
The former world No. 1 and 16-time Grand Slam champion Federer, who turned 30 here on Monday, captured this Canadian event in 2004 and 2006 and was also a runner-up in 2007. His third-round opponent will be quality Frenchman Jo- Wilfried Tsonga, who upset the Swiss icon in the quarterfinals at Wimbledon last month.
Fifth-seeded Frenchman Gael Monfils, fresh off his runner-up finish in Washington, D.C. last week, got past American qualifier Alex Bogomolov Jr. 6-2, 7-6 (7-5), while seventh-seeded Czech Tomas Berdych landed in the round of 16 with a 4-6, 6-2, 6-3 come-from-behind victory over Ukrainian Alexandr Dolgopolov and eighth-seeded Spaniard Nicolas Almagro drove out Ukraine's Sergiy Stakhovsky 6-2, 7-6 (7-5) on Day 3.
In other second-round action involving seeds, No. 10 Frenchman Richard Gasquet grounded Brazil's Thomaz Bellucci 6-1, 6-4, a No. 13 Tsonga topped rising Aussie wild card Bernard Tomic 6-3, 7-6 (7-1), and No. 14 Swiss Stanislas Wawrinka waltzed past American qualifier Michael Russell 6-3, 6-2.
In second-round action not involving seeds, 6-foot-10 Croat Ivo Karlovic outlasted German qualifier Philipp Petzschner 6-7 (0-7), 7-6 (7-2), 7-6 (8-6) in 2 hours, 54 minutes. The big-serving Karlovic fired 17 aces en route to victory.
The first round concluded on Wednesday, as 15th-seeded Spaniard Fernando Verdasco overcame German Tobias Kamke 5-7, 6-3, 6-3, American John Isner erased former Aussie Open runner-up Marcos Baghdatis of Cyprus 6-3, 6-4 and Spaniard Feliciano Lopez outlasted last week's Washington D.C. titlist Radek Stepanek of the Czech Republic 6-4, 4-6, 6-4. All three matches were suspended because of rain here on Tuesday night.
Verdasco and Isner both had to play again on Wednesday and lost to Janko Tipsarevic and 12th-seeded Viktor Troicki, respectively. Tipsarevic won 6-4, 6-7 (5-7), 6-3, while Troicki picked up a 6-4, 3-6, 6-2 victory.
Fish is taking on Feliciano Lopez in the nightcap.
The 2011 Rogers Cup titlist will pocket $450,000.