Second-seeded Nishikori broke at love in the 11th game to seize momentum in a 7-5, 6-2 win over Denis Kudla in the second round, his season-opening match after getting a first-round bye in Brisbane.
"Tough match," Nishikori said. "After 5-5 I think he dropped a little bit his level and I started playing better, playing more aggressive and started getting more rhythm and my serve got better in the second. So yeah, I think it was good first match."
Sixth-seeded Dimitrov, who beat Nishikori for the first time here in the 2017 title match, had to withstand a late comeback from local favorite John Millman before winning 6-3, 6-4. He had three points for a 5-1 lead in the second set but was broken as Millman went on a roll before Dimitrov regained control.
Dimitrov said he was distracted for a while despite being up two breaks but "I was not worried to the extent that I was panicking."
"I managed to keep my composure really good throughout the whole match, especially at 4-4," he added.
He's using the quarterfinal against Nishikori as a barometer for where his preparations stand for the Australian Open, which starts Jan. 14.
"It's great. I mean it's right off the blocks. It's perfect to play a match like that to kind of see where your game is at, how your movement goes," Dimitrov said. "Kei is the favorite. Right now he's been playing unbelievable, great finish of the year, a lot of confidence right now, striking the ball, amazing, feels free.
"But, again, I like my chances. We've had quite a few battles against each other. I'm just going to try to control things on my terms."
Defending champion and No. 8-seeded Nick Kyrgios was ousted 6-7 (5), 6-2, 6-3 by Jeremy Chardy a day after saying his preparation was hampered by a spider bite last week on his foot.
Chardy will next play Japanese qualifier Yasutaka Uchiyama, who upset third-seeded Kyle Edmund 7-6 (6), 6-4. Fifth-seeded Milos Raonic advanced with a 6-3, 7-6 (2) win over Miomir Kecmanovic.
Anett Kontaveit beat fourth-seeded Petra Kvitova 7-5, 7-6 (1) to advance to the women's quarterfinals, and Anastasija Sevastova set up a match against U.S. Open champion Naomi Osaka when she beat Harriet Dart 6-2, 6-0.