Tour de France champion Wiggins finished 10th as the Giro entered the Alps, leaving him fourth in the general classification, two minutes and five seconds behind Astana’s Nibali.
But it could have been worse for the 33-year-old Olympic time trial gold medallist, who is less at home on stages reliant on steep climbs, and with 11 stages remaining he is not yet out of contention.
His team-mate Rigoberto Uran, who won silver in the London 2012 road race, produced a late burst to claim victory in yesterday’s stage, and overtake Wiggins by one second in the overall standings.
Australia’s Cadel Evans remains second, 41 seconds behind Nibali, but defending champion Ryder Hesjedal may have suffered irreparable damage to his chances after falling more than 23 minutes behind Nibali.
Wiggins was part of a Team Sky effort to reel in an early breakaway but, having rejoined the leaders 9.5km from the finish, he could not keep pace when Uran surged clear on the final 20 per cent climb.
Pink jersey-holder Nibali pursued Uran with 4.5km remaining and finished third, behind another Colombian, Carlos Betancur of Ag2R La Mondiale.