Nicolson was the son of the writers Sir Harold Nicolson and Vita Sackville-West; he had a brother Ben, later an art historian. The boys grew up in Kent, first near their mother's ancestral home at Knole and then at Sissinghurst Castle, where their parents created a famous garden. Nicolson was sent away from home at a young age, as was the custom of the time, to be educated at Summer Fields, a prep school in Oxford; Eton College; and Balliol College, Oxford. He served with the Grenadier Guards during World War II, later writing their official history.

Nicolson wrote many books and founded with George Weidenfeld the firm Weidenfeld and Nicolson, of which he was a director from 1948 to 1992. He also worked as a broadcaster and was a member of the Ancient Monuments Board.

Although his father had been first a National Labour and then a Labour politician, Nigel Nicolson became active in the Conservative Party and contested Leicester North West in 1950 and Falmouth and Camborne in 1951, without success. He was elected Member of Parliament for Bournemouth East and Christchurch at a by-election in February 1952, when the previous MP, Brendan Bracken, was elevated to the House of Lords. Nicolson was re-elected in the seat in the general election of May 1955. However, he was uncomfortable within the Tory party and voted with Labour to abolish hanging and abstained in a vote of confidence in the government over the Suez War. His constituency association called for him to resign and wrote to the Prime Minister briefing against their MP. A ballot of members was called. Unfortunately for Nicolson, a scandal relating to his publishing interests broke at the same time — the company's publication of Vladimir Nabokov's novel Lolita. Nicolson lost the members' vote and was forced to step down at the general election of October 1959.

Nicolson returned to writing, particularly on heritage and biography. He co-wrote a celebrated 1973 book on his parents, Portrait of a Marriage. It balanced a frank account of his bisexual parents' extramarital affairs (especially Vita Sackville-West's 'elopement' with Violet Trefusis) with their enduring love for each other; it caused an uproar when it was published. He also edited his father's diaries and, with Joanne Trautmann, the letters of Virginia Woolf. Later he wrote The Spectator's Long Life column and a Time of My Life column for The Sunday Telegraph. His autobiography, Long Life, was published in 1997.

In 1953 Nicolson married Philippa, the daughter of Sir Gervais Tennyson-d'Eyncourt, and they had two daughters, Rebecca, a publisher, Juliet, a historian, and a son, Adam, a writer. They divorced in 1970.