The 30-year-old Nadal was due to lead his team out at the London Games in 2012 but a knee injury forced him out of the tournament where he had been due to defend his gold medal.
Basketball star Pau Gasol took over flag-bearing duties instead.
Four years on, 14-time major winner Nadal is injured again, this time nursing a damaged left wrist which has kept him off tour since the French Open in May.
"Clearly, it's another plus to be the flag-bearer and I have already had to give it up in London. To give it it up two times in a row would have been very hard and has of course influence my decision to compete."
Nadal will play all three events in Rio -- singles, men's doubles with Marc Lopez and mixed doubles with French Open champion Garbine Muguruza.
With a cloud over his fitness, Nadal has refused to put a target on his medal ambitions.
Nadal said he won't be too nervous on Friday when he carries the Spanish flag.
"Someone has to carry the flag and they chose me. I am happy and have a special feeling because it is a unique moment.
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