Berrettini, who is the first Italian to qualify for the season-ending event since 1978, could do nothing to best the 16-time Grand Slam victor who fully controlled the rhythm of the game.
Federer went down with a fight, but the third seed was beaten when he dumped a backhand into the net after seeing two points to get back on serve come and go.
"But, yeah, I've got to recover, I've got make sure I play better than today, and hopefully I can win that match".
"I´ve been enjoying the conditions here for many years", he added.
He has often struggled with injuries towards the end of the season - missing the ATP Finals previous year through injury and pulling out after just one match in 2017.
Thiem, beaten by Federer in the group stage a year ago, increased his power in the second set and pounced again to break at 5-5.
"We had a good and close match, and it's always special to beat Roger, who is a legend", said Thiem, who impressed with his clean hitting.
Federer also lost his opening group match past year to Kei Nishikori but recovered to reach the semi-finals.
"But I recovered well, and I thought after that the match was actually pretty even for a long period of time".
If the Serbian does claim the year-end number one ranking for a sixth time, he would match the record of Pete Sampras and victory at the end-of-season event would equal Roger Federer´s mark.
Djokovic must reach the final at the O2 Arena to stand any chance of dislodging Nadal but there are major questions over the Spaniard´s fitness.
"It feels great to be back", said the Wimbledon champion.
And he will likely need a faultless display from here on in if he is to make it to the semi-finals at London's O2 Arena.
The second-seed Serb, who has been drawn in the Bjorn Borg Group, needed just 64 minutes to beat his less experienced opponent.
Nadal, who has never won the event, is bidding to clinch the year-end number one spot in the ATP rankings for a fifth time.
Spaniard Nadal, who has concerns over an abdominal injury sustained at the Paris Masters, plays his first group match on Monday against defending champion Alexander Zverev.