Nadal, who had reached the final of every Wimbledon since 2005 apart from in 2009 when he was injured, was out-fought and out-played by the powerful Czech, who turned in the game of his life, showing nerves of steel to close out the victory with three aces in a row.
Rosol, who was playing his first Wimbledon and second Tour grass tournament, lost the first set on a tie-breaker after breaking Nadal once and failing to take a set point.
He played the better tennis throughout though and, while Nadal was not at his best, some of Rosol's serving and groundstrokes were top-four standard.
Rosol is the lowest-ranked player to beat second seed Nadal in a Grand Slam., with the Spaniard frustrated and uncomfortable throughout the match, which lasted over four hours and included a 40-minute delay as they drew the roof over Centre Court.
Nadal constantly complained to the umpire - about the decision to draw the roof, about Rosol's insistence on taking all his serves quickly, and even about the Czech's stance, as the Spaniard felt his movement between points was distracting.
Rosol was a bundle of energy, but it was his bravery and confidence that saw him through, not to mention his power and talent.
"I don't know what to say," Rosol said afterwards. "So many emotions, I don't know what to say.
"Nadal is a superstar but I played unbelievable today. I hope I can play one more match like this."
If he plays anything like he did against Nadal, Rosol should go far - next up is experienced grass-court player Philipp Kohlschreiber of Germany.
The stunning result will also be music to Andy Murray's ears - Britain's world number four is in Nadal's side of the draw and had been due to face him in the semi-finals, although he will need to get past the likes of David Ferrer first.
Simon, seeded 13th, was no match for the Belgian, a semi-finalist here 10 years ago, who sealed victory in two and a half hours.
Malisse's reward for the win is a third round showdown against Fernando Verdasco, seeded 17th at this year's tournament.
The Spaniard needed four sets to overcome the challenge of Slovenian opponent Grega Zemlija 7-6(4) 7-6(4) 3-6 6-3.
Fifth seed Jo-Wilfried Tsonga overcame a first-set tie-break loss to beat Spain's Guillermo Garcia-Lopez 6-7 6-4 6-1 6-3.
The popular Frenchman, who beat Roger Federer last year at Wimbledon, faces Lukas Lacko next.
Seventh seed David Ferrer easily overcame unheralded Frenchman Kenny De Schepper 7-6 6-2 6-4 to set up a tantalising third-round clash with Andy Roddick.
Roddick, seeded 30th but with a fine grass-court record, ousted Germany's Bjorn Phau 6-3 7-6 6-3.
Kei Nishikori , the 19th seed, beat France's Florent Serra 6-3 7-5 6-2 to become the first Japanese male player to reach the third round of the Wimbledon singles since Shuzo Matsuoka 17 years ago.
He will face Argentina's Juan Martin Del Potro after the ninth seed beat another Japanese, Go Soeda, 6-2 6-3 1-6 6-4.
Belgian David Goffin, who gave Roger Federer a big scare at the French Open this month, backed up his impressive first round win over Australian 20th seed Bernard Tomic with a four-sets victory over American Jesse Levine.
The youngster faces Mardy Fish next after he beat British outsider James Ward in five sets.
Marin Cilic , the 16th seed, is also through after a 7-6 6-2 6-1 win over Lukas Kobot of Poland. Next for the Croat is one of Sam Querrey or Milos Raonic, whose match was suspended due to bad light. Both men had taken one set each on a tie-break.