The Spaniard, 28, won 6-3 6-2 6-2 in his first match at a Grand Slam since Wimbledon following injury and illness.
Second seed Roger Federer outclassed Yen-Hsun Lu 6-4 6-2 7-5 while sixth seed Andy Murray beat India's Yuki Bhambri 6-3 6-4 7-6 (7-3).
Women's fifth seed Ana Ivanovic suffered a shock 1-6 6-3 6-2 defeat by Czech qualifier Lucie Hradecka.
The Serb was one of eight seeds to lose but second seed Maria Sharapova, third seed Simona Halep and sixth seed Eugenie Bouchard all advanced in straight sets.
Nadal happy with Slam return
Nadal, who is a 14-time Grand Slam winner, had only played eight matches since a shock defeat by Australian teenager Nick Kyrgios at Wimbledon last year.
Before the tournament, he played down his chances of winning a second Australian Open title but showed glimpses of his best against world number 49 Youzhny.
"I was a little bit under doubt before, but I think I played without making too many mistakes and the only way to get better is to win more matches so it will probably help me," said Nadal.
"In general I was working well, returning well and I just need to build a little bit, such as being more dynamic with the movements sometimes. But for the rest I am more or less happy.
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