Nadolny grew up in the town of Traunstein, in Upper Bavaria. After receiving his Abitur, he studied history and political science in Munich, Göttingen, Tübingen and Berlin. Nadolny received his PhD in 1976 at the Free University of Berlin. His dissertation was on German disarmament diplomacy at the 1932/33 Geneva Conference shortly before Hitler came to power. Nadolny's grandfather, Rudolf Nadolny, had in fact led the German delegation.

Nadolny worked for about a year as a history teacher before entering the film industry as a production manager, an experience he wrote about in his first novel, the semi-autobiographical Netzkarte. He currently lives in Berlin.

Nadolny's first novel, Netzkarte was published in 1981. Originally, it was written as a script for a film that was never realized. It details the adventures of a young man named Ole Reuter, who purchases a "Netzkarte", or ticket that allows him to travel by train throughout (then West) Germany. Nadolny revisits the character of Ole Reuter in a sequel, Er oder Ich ("Him or Me"), published in 1999.

His best known work is The Discovery of Slowness (1987; originally published in 1983 as Die Entdeckung der Langsamkeit), a fictionalized meditation on the life and lessons of British Arctic explorer Sir John Franklin. A pre-publication portion of the novel titled Kopenhagen 1801 (which would become the fifth chapter) had earned Nadolny the Ingeborg Bachmann Prize in 1980.