The third seed had to show speed, control and variation to see off Kim Hyo Min of Chinese Taipei 21-15 21-15 and set up last-eight showdown with Wang Yihan, the 2009 winner.
"I was playing her for the first time and she had early shots that I just didn’t anticipate," Nehwal told reporters.
"No match is easy here and I will have to prepare well (against Wang). The girls are getting faster on court," added the 24-year-old who is bidding to become the first Indian female winner at the All-England.
The only time Nehwal has beaten Wang came via a retirement and the Chinese holds an 8-1 career lead.
A win for either player will open a path to Sunday's final after Olympic champion Li Xuerui's surprise defeat by compatriot Sun Yu.
Sun, the world number 18, triumphed 21-13 21-13 to secure a meeting with Thailand's Ratchanok Intanon, the number eight seed.
"I still haven't recovered from my foot injury," Li said. "I have only been in full training for two weeks but I came to this tournament because I love it and I never expected to win the title.
"I am disappointed but it's not a major setback as I came here to enjoy it." World champion Carolina Marin of Spain remained on track for a first All-England title with a straight-games win over Porntip Buranaprasertsuk of Thailand.
In the men's singles, defending champion Chen Long dispatched Chinese Taipei's Jen Hao Hsu 21-7 21-9.
(Editing by Tony Jimenez)
