Nadal, who has had problems with his knees before on the American hardcourts, apologised for withdrawing from the Masters series event, but said he had to.
"I am not ready to compete today. I am very sorry for the fans. I'm very sorry for the tournament. I'm very sorry for everybody who were ready to watch the match on the television," Nadal told a news conference.
"I take no pleasure from this but I cannot do anything else. I am not ready to compete, and I cannot go on court and lie to everybody."
Murray, the Miami champion in 2009, was gifted his second walkover of the tournament after Canadian Milos Raonic pulled out of their third round match with an ankle injury.
The Scotsman will play top-seeded Serb
"To get two in one week is strange. That doesn't happen often really at all," said the fourth seed.
"It's never happened to me before. So I don't really know how I'm going to feel for the final, but I'll definitely be fresh."
Nadal, who has suffered from tendinitis in his knees several times during his career, had dropped only one set on his way to the last four as he chased a first title since last year's French Open.
He suggested the injury was probably a recurrence of his previous knee troubles.
"I have to see a doctor but it looks like nothing really, different than what happened a few times in the past," he said.
In 2009, Nadal pulled out of Wimbledon, where he had won the year before, because of knee problems.
At the 2010 Australian Open, where he was the defending champion, he retired from his quarter-final clash with Murray, again because of knee problems.
But the 25-year-old Spaniard said his knees were in better overall condition than they had been and he was confident of being ready for the upcoming European claycourt season.
"The tendons are much better today than three years ago. The treatments worked fantastic," he said.
"Even if today I have a really bad knee and last couple of days were tough for me, the positive thing is the tendon has improved a lot in the last couple of years.
"This year I started well with no problems. Today is bad news but that's the sport. We cannot expect, playing as much as we play, to be perfect every day of our life.
"Today is my turn. Everybody has problems and I will be working hard to be back quick on court and to play my best in Monte-Carlo.".