Nadal, who has never won the tournament, was a break behind in the opening set before stepping up a gear to set up a third round meeting with Uruguay’s Pablo Cuevas.
"It was not the goal," Nadal said about finishing the year as number one. "It was impossible for me to think about that when you are coming back from a tough period of time without playing tennis and with so many injuries in the last couple of years.
"But it happened and I'm very happy of course... After almost 10 years since the first time that I finished the year with this number. So I think it's a very important achievement."
Hyeon got off to a solid start and broke Nadal’s serve as he moved 2-1 up but the Spaniard then won four games in a row.
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The South Korean levelled for 5-5 but paid for his efforts as Nadal sealed the set with two successive games.
The world number one made the decisive break in the eighth game of the second set and bagged a straightforward win on his second match point when Hyeon sent a forehand long.
Earlier, Germany’s Alexander Zverev was knocked out in the second round when he slumped to a 3-6 6-2 6-2 defeat against Dutch journeyman Robin Haase.
The fourth seed, who has already booked his ticket for the season-ending ATP World Tour finals in London, lost his way in the match after Haase levelled at one-set all.
The 20-year-old Zverev converted his only break point in the first set to take the lead while Haase wasted six break chances.
But Haase played a bit tighter in the second set and it was enough to unsettle Zverev, who never threatened again in an almost empty AccorHotels Arena.
Jo-Wilfried Tsonga's hopes of taking part in the Tour finals were dashed when he lost 2-6 7-6(4) 6-2 to fellow Frenchman Julien Benneteau.
(Reporting by Julien Pretot; Editing by Ken Ferris and Toby Davis)
