Nadal, who claimed the honour for the third time, made a sensational comeback from an injury-plagued 2016, winning a 10th French Open title and the U.S. Open to take his grand slam haul to 16, three behind Roger Federer who also won two of the year's majors after returning from injury.
The 31-year-old Mallorcan ended the year as world number one, although he pulled out of the season-ending ATP Finals in London due to a knee injury.
Muguruza won the ITF award for the first time after capturing the Wimbledon title and ascending to the world number one ranking for the first time.
She ended the year ranked number two behind Romania's Simona Halep who is still chasing a first grand slam title.
The last time two players from the same country scooped the awards was in 1998 when Americans Pete Sampras and Lindsay Davenport took the honours.
Lukasz Kubot of Poland and Marcelo Melo of Brazil won the men's doubles award while Chan Yun-Jan of Chinese Taipei and the recently-retired Martina Hingis of Switzerland took the women's prize.
(Reporting by Martyn Herman, editing by Ed Osmond)
