Roger Federer said Rafael Nadal "totally deserves" the number one ranking, paying warm tribute to the Spaniard who takes over the top spot on Monday.
Federer, who grabbed Olympic doubles gold with partner Stanislas Wawrinka, said Nadal had played his way to the top and admitted he was now dominating the sport.
"I've known for over a week now about the number one ranking. But it's fine. Rafa played great to get it," Federer said.
"That's what I expected and hoped for many years ago when I got to number one, that if ever somebody were to take it away from me, he would have to play an incredible tennis schedule, win the biggest tournaments, dominate the game basically, and then like this he can take number one.
"I didn't want it to happen that I would play completely bad and somebody would pick up number one in the world. So I think Rafa totally deserves it."
The comments could signal a generational shift in tennis with Federer, 27, ceding to Nadal after four-and-a-half years on top.
Nadal, 22, has already spent more than three years at number two but has been in phenomenal form this season, racking up his fourth French Open win, his first Wimbledon crown and reaching the Olympic final.
Federer meanwhile has been talking about changing focus from the battle for number one to concentrate even more on big tournaments and Grand Slams, where he remains two shy of Pete Sampras' record 14 titles.
By his lofty standards he has been in unusually poor form, losing to James Blake in the singles quarter-finals here for his 12th defeat of the season.
But the Swiss was all smiles after sealing his first Olympic medal in three attempts, hugging and cavorting on court with world number 10 Wawrinka.
"The thing is, I can't just hug a stranger when I win singles," he quipped, comparing his situation with US swimmer Michael Phelps.
"It's a great feeling, especially celebrating it together. I guess Michael Phelps knows that, too. When he wins alone in the pool, it's not the same as when he wins it in relay."
Federer said Olympic gold was a "dream-come-true moment" quite unlike the Grand Slams after watching Marc Rosset's 1992 singles win when he was a small boy of 10.
"Since '92, when Marc Rosset won Olympic gold in tennis for Switzerland, it's something I quite remember," he said.
"Who knows, maybe deep down I was hoping to equal that one day or be part of the Olympic Games."
Federer now sets his sights on this month's US Open, where he is unbeaten in four years, and the end-of-season Tennis Masters Cup in Shanghai where he is two-time defending champion.