Dubbed “The Shark", the Astana rider set the platform for victory with a controversial attack before the top of the massive Col de la Croix de Fer climb and carried that through to the finish.
Second was a fast moving Nairo Quintana (Movistar), who attacked an isolated Chris Froome (Team Sky) with 5km to go and rode solo to finish just 44 seconds behind 2014 Tour champion Nibali.
Froome, the 2013 champion and current race leader, contained the damage to retain his overall lead, losing only 28 seconds to Quintana. Alejandro Valverde (Movistar) held on to his third place overall, despite struggling on the upper slopes of the final climb.
Nibali’s ride moved him up to fourth overall at just less than two minutes behind Valverde.
With an immediate climb on the horizon as the flag fell, fireworks were expected from the outset, and that was what the peloton delivered.
The action started immediately when Joaquim Rodriguez (Katusha) and later Alberto Contador (Tinkoff-Saxo) launched separate attacks on the Col du Chaussy, which came almost at kilometre zero.
While Rodriguez was hunting for mountains classification points, Contador’s attack was clearly speculative and only lasted for a few hundred metres.
The high tempo put the majority of Team Sky in immediate difficulty leaving Froome somewhat isolated, but he managed to cover the riders who mattered, including Contador, whose effort was short lived.
The peloton was strung out over the first categorised climb but once Rodriguez had descended into the valley below it was mostly back together for those with ambitions for the stage and general classification.
A 21-rider break, which included Europcar’s Pierre Rolland, rode on through to the intermediate sprint at Epierre and to the base of the Col de la Croix de Fer.
The 22.4km long climb became a war of attrition for a tired peloton as each rider settled in to ride at his own pace on the mountain, the favourites among them.
The race reanimated when Rolland struck out on his own with 67km to go. In response the only substantive reaction coming from Nibali, who launched a controversial attack of his own when Froome was momentarily stalled by a mechanical incident.
“Close to the summit of the Col du Glandon my back wheel locked up and a bit of tar or a small stone had locked itself between my brake calipers and my back wheel," said Froome. "So I had to stop, take the wheel backwards and get the stone out. Unfortunately, that was the moment Nibali had decided to make his move.”
Nibali was unapologetic about the controversial move. "I won for me, for the podium and for the team," he said.
From the moment of Nibali's attack, and with dwindling support from his Sky team, Froome was under pressure. But the 2013 Tour champion held his nerve to contain any severe damage by Quintana.
“It was a massive day out there and the racing was on from the word go,” said Froome. “All in all, it was a pretty good stage for us and we were able to tick another day off. We’ve got one day of serious racing left now.
"Quintana put in a real big attack there and I chose to ride at my own tempo, limit my losses, and stay within myself ahead of another big day tomorrow."