Just weeks after winning his 10th French Open title, Nadal was condemned to his fifth exit before the quarter- finals in his last five visits to Wimbledon.
The 31-year-old Spaniard, finally worn down by Muller after four hours and 48 minutes on Court One, hasn't won Wimbledon since 2010 and last made the quarter-finals in 2011.
Muller, seeded 16th, will make his first Wimbledon quarter-final appearance against former US Open champion Marin Cilic.
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