Nico was born Christa Päffgen in Cologne, five years after the Nazis came to power in Germany. When she was two years old, she moved with her mother and grandfather to the Spreewald forest outside of Berlin. Her father was enlisted as a soldier during the war, and sustained head injuries that caused severe brain damage; he died in a concentration camp. In 1946, Nico and her mother relocated to downtown Berlin, where Nico worked as a seamstress. She attended school until the age 13, and then began selling lingerie in the exclusive department store KaDeWe, eventually getting modeling jobs in Berlin. Standing at five feet, ten inches tall and with chiseled features and porcelain skin, Nico rose to prominence as a fashion model as a teenager.

At 15 years of age, according to various conflicting accounts, Nico was said to have been raped by a GI of the U.S. Air Force who was sentenced to death. Her song "Secret Side" from the album The End, made oblique references to this. A review of the album The End examines the poetry of "Secret Side" and questions the validity of the rape legend.

Discovered at 16 by photographer Herbert Tobias while both were working at a KaDeWe fashion show in Berlin, Tobias christened 'Nico' with her adopted name, which she used for most of her life. Tobias named her this after his ex-boyfriend, filmmaker Nikos Papatakis. She soon moved to Paris and began working for Vogue, Tempo, Vie Nuove, Mascotte Spettacolo, Camera, Elle, and other fashion magazines. At age 17, she was contracted by Coco Chanel to promote their products, but she fled to New York City and abandoned the job. Through her travels, she learned to speak English, Spanish, and French.

After appearing in several television advertisements, Nico got a small role in Alberto Lattuada's film La Tempesta (1958). She also appeared in Rudolph Maté's For the First Time, with Mario Lanza, later that year.

In 1959 she was invited to the set of Federico Fellini's La Dolce Vita, where she attracted the attention of the acclaimed director, who gave her a minor role in the film as herself. By this time, she was living in New York and taking acting classes with Lee Strasberg.

She appears as the cover model on jazz pianist Bill Evans' 1962 album, Moon Beams. After splitting her time between New York and Paris, she got the lead role in Jacques Poitrenaud's Strip-Tease (1963). She recorded the title track, which was written by Serge Gainsbourg but not released until 2001, when it was included in the compilation Le Cinéma de Serge Gainsbourg.

In 1962 Nico gave birth to her son, Christian Aaron "Ari" Päffgen, commonly held to have been fathered by French actor Alain Delon. Delon always denied his paternity. The child was raised mostly by Delon's mother and her husband and eventually was adopted by them, taking their surname, Boulogne.

In 1965 Nico met Rolling Stones guitarist Brian Jones and recorded her first single, "I'm Not Sayin'" with the b-side "The Last Mile", produced by Jimmy Page for Andrew Loog Oldham's Immediate label. Actor Ben Carruthers introduced her to Bob Dylan in Paris that summer. Dylan played the song "I'll Keep It with Mine" for her shortly thereafter, which she recorded for her first album, Chelsea Girl, in 1967.

After being introduced by Brian Jones, she began working in New York with Andy Warhol and Paul Morrissey on their experimental films, including Chelsea Girls, The Closet, Sunset and Imitation of Christ.

When Warhol began managing The Velvet Underground he proposed that the group take on Nico as a "chanteuse". They consented reluctantly, for both personal and musical reasons. The group became the centerpiece of Warhol's Exploding Plastic Inevitable, a multimedia performance featuring music, light, film and dance. Nico sang lead vocals on three songs ("Femme Fatale", "All Tomorrow's Parties", "I'll Be Your Mirror") and backing vocal on "Sunday Morning", on the band's debut album, The Velvet Underground & Nico (1967). The album went on to become timeless in legend. It scored #13 on Rolling Stone's 500 Greatest Albums of All Time, though it was poorly received at the time of its release.

Immediately following her musical work with The Velvet Underground, Nico began work as a solo artist. For her debut album, 1967's Chelsea Girl, she recorded songs by Bob Dylan, Tim Hardin and Jackson Browne, among others. Velvet Underground members Lou Reed, John Cale and Sterling Morrison contributed to the album, with Nico, Reed and Cale co-writing one song, "It Was a Pleasure Then." Chelsea Girl is a traditional chamber-folk album, which influenced artists such as Leonard Cohen, with strings and flute arrangements by producer Tom Wilson. Nico was not satisfied with the album and had little say in production matters. In retrospect, she said in 1981:

For The Marble Index, released in 1969, Nico wrote the lyrics and music. Accompaniment mainly centered around Nico's harmonium, while John Cale added an array of folk and classical instruments, and arranged the album. The harmonium became her signature instrument for the rest of her career. The album has a classical-cum-European folk sound.

Nico released two more solo albums in the 1970s, Desertshore and The End.... Nico wrote the music, sang, and played the harmonium. Cale produced and played most of the other instruments on both albums. The End... featured Brian Eno on synthesizer and Phil Manzanera on guitar, both from Roxy Music. She appeared at the Rainbow Theatre, in London, with Cale, Eno, and Kevin Ayers. The album June 1, 1974 was the result of this concert. Nico performed a version of the Doors' "The End", which was the catalyst for The End... later that year.

Between 1970 and 1979, Nico made about seven films with French director Philippe Garrel. She met Garrel in 1969 and contributed the song "The Falconer" to his film Le Lit de la Vierge. Soon after, she was living with Garrel and became a central figure in his cinematic and personal circles. Nico's first acting appearance with Garrel occurred in his 1972 film, La Cicatrice Intérieure. Nico also supplied the music for this film and collaborated closely with the director. She also appeared in the Garrel films Anathor (1972); the silent Jean Seberg feature Les Hautes Solitudes, released in 1974; Un ange passe (1975); Le Berceau de cristal (1976), starring Pierre Clémenti, Nico and Anita Pallenberg; and Voyage au jardin des morts (1978). His 1991 film J'entends Plus la Guitare is dedicated to Nico.

On 13 December 1974, Nico opened for Tangerine Dream's infamous concert at Reims Cathedral in Reims, France. The promoter had so greatly oversold tickets for the show that members of the audience couldn't move or reach the outside, eventually resulting in some fans urinating inside the cathedral hall. The Roman Catholic Church denounced these actions, ordered the rededication of the cathedral and banned future performances on church property.

Nico and Island Records allegedly had many disputes during this time, and in 1975 the label dropped her from their roster.

She made a vocal contribution to Neuronium's second album, Vuelo Químico as she was at the studio, by chance, while it was being recorded in Barcelona in 1978 by Michel Huygen, Carlos Guirao and Albert Gimenez. She read excerpts from Ulalume by Edgar Allan Poe. She said that was deeply moved by the music, so she couldn't help to make a contribution.

Nico returned to New York in late 1979 where her comeback concert at CBGB in early 1980 was reviewed postitively in The New York Times. She began playing regularly at the Mudd Club and other venues with Jim Tisdall accompanying her on harp and Gittler guitar. They played together on a sold-out tour of twelve cities in the East and Midwest.

Nico recorded her next studio album, Drama of Exile, in 1981. produced by Philippe Quilichini. Mahamad Hadi aka Mad Sheer Khan played oriental rock guitar and wrote all the oriental production. It was a departure from her earlier work with John Cale, featuring a mixture of rock and Middle Eastern arrangements. She recorded her final solo album, Camera Obscura, in 1985, with The Faction (James Young and Graham Dids). Produced by John Cale, it featured Nico's version of the Richard Rodgers/Lorenz Hart song "My Funny Valentine".

A number of Nico's performances towards the end of her life were recorded and released, including 1982's Heroine, Live In Tokyo, and her final concert, Fata Morgana, recorded on 6 June 1988. The double live album Behind the Iron Curtain was recorded during a tour of Eastern Europe, before the fall of the Berlin Wall, and made from recordings of concerts in Warsaw, Prague, Budapest and other cities, and was released before her death in 1988.

A duet called "Your Kisses Burn" with singer Marc Almond was her last studio recording (about a month before her death). It was released a few months after her death on Almond's album The Stars We Are.

Nico's final recording was of her last concert, 'Fata Morgana', at the Berlin Planetarium on the 6th June 1988. This was a specially commissioned work created by Nico and The Faction and featured a number of new compositions. A CD of this concert was released in 1994 and again in 2012.

Nico had an affair with French actor Alain Delon and from this relationship conceived a son Christian Aaron Boulogne, whom Nico called "Ari." Delon denied paternity and Nico had difficulty raising Ari, so the boy was raised by Delon's parents. Ari became a photographer and actor, and had a son in 1999.

Nico saw herself as part of a tradition of bohemian artists, which she traced back to the Romanticism of the early 19th century. She led a nomadic life, living in different countries. Apart from Germany, where she grew up, and Ibiza, where she died, Nico lived in Italy and France in the 1950s, spent most of the 1960s in the US, and lived in London in the early 1960s and again later in the 1980s, when she lived intermittently between London and Manchester.

During the final years of her life she was based around the Prestwich and Salford area of Greater Manchester and although she was still struggling with addiction had started to become interested in music again.

Nico was a heroin addict for over 15 years. In the book Songs They Never Play on the Radio, James Young, a member of her band in the 1980s, recalls many examples of her troubling behaviour due to her "overwhelming" addiction – and also that Nico claimed to have never taken the drug while with the Velvets/Factory scene but only began using during her relationship with Philippe Garrel in the 1970s. Shortly before her death, Nico stopped taking heroin and began methadone replacement therapy and embarked upon a regimen of bicycle exercise and healthy eating.

Despite her career in music, she was deaf in one ear, which made it difficult for her to understand what others were saying.

On 18 July 1988, while on holiday in Ibiza with her son Ari, Nico had a minor heart attack while riding a bicycle and hit her head as she fell. A passing taxi driver found her unconscious and had difficulty getting her admitted to local hospitals. She was incorrectly diagnosed as suffering from heat exposure and died at eight o'clock that evening. X-rays later revealed a severe cerebral hemorrhage as the cause of death.

Nico was buried in her mother's plot in Grunewald Forest Cemetery in Berlin. A few friends played a tape of "Mütterlein," a song from Desertshore, at her funeral.

Nico has influenced many musicians, including Siouxsie and the Banshees, Bauhaus, Stevie Nicks, Elliott Smith, Patti Smith, Morrissey, Björk, Coil, Jocelyn Pook, Fabienne Shine (who covered "All Tomorrow's Parties"), Dead Can Dance, Marcus Reeves as well as numerous contemporary goth bands. Kevin Ayers painted a withering and beautiful portrait of Nico in "Decadence" (the centerpiece of his Bananamour album in 1973) Late singer-songwriter Elliott Smith cited her as a major inspiration and was said to have listened to The Marble Index for months. Smith performed covers of some of her songs – most notably "Chelsea Girls" and "These Days", both of which he performed live at Satyricon in Portland, Oregon in October 1999. Two of her songs from Chelsea Girl, "The Fairest of the Seasons" and "These Days", both written by Jackson Browne, are featured in Wes Anderson's film The Royal Tenenbaums. Shannon Hoon of Blind Melon named his daughter 'Nico Blue' partly after Nico. Blind Melon's album Nico was released after Hoon's death.

Hedwig and the Angry Inch, a movie written by John Cameron Mitchell, mentions Nico as an influential artist in its song, "Midnight Radio". The song is written by Stephen Trask. Icelandic singer Björk opened concerts on her 1995–1997 Post tour with "Le Petit Chevalier" from Desertshore. The Cult recorded the song "Nico", which celebrates the life of the singer, on their 2001 album Beyond Good And Evil. For her 2002 album, Kissin' Time, Marianne Faithfull recorded "Song for Nico", cowritten with Dave Stewart. Los Angeles band The Warlocks recorded a different song, also entitled "Song for Nico" on their 2003 album, "Rise and Fall".

Nico was portrayed by Christina Fulton in the 1991 biopic The Doors. She was later portrayed by Meredith Ostrom in the 2006 film, Factory Girl, which chronicles the life of fellow "Warhol Superstar", Edie Sedgwick. Soap & Skin portrayed Nico in the theatre play Nico - Sphinx aus Eis in 2008, written by Werner Fritsch. In the play, Nico was portrayed by several actresses. Soap & Skin also recorded her song "Janitor of Lunacy". Natasha Khan (Bat for Lashes) has quoted Nico as an influence in particular Desertshore (The opening song on her first album, Fur and Gold, uses the name of the album in its lyrics). During 2007 she would start concerts with "Le Petit Chevalier" from that record.

Singer-songwriter Patrick Wolf has been influenced by Nico, and released cover versions of "Afraid" and "Ari's Song" as b-sides on EPs. Rock band Anberlin named one of their songs after her: "Dance, Dance Christa Päffgen" on their album "Never Take Friendship Personal". The song also makes reference to her death, and her drug use. Austin based band Shearwater dedicated their album Palo Santo to the memory of Nico. The opening song ("La Dame Et La Licorne") depicts Nico's death at Ibiza, Spain. Windsor for the Derby, another Austin-based band, released an instrumental track named "Nico" in 2000 on their Young God Release "Difference and Repetition." A live version of the song can be found on a limited edition 7-inch.

Low, an American indie rock group from Duluth, Minnesota, has a song titled "Those Girls (Song For Nico)". It is included on the box set A Lifetime of Temporary Relief: 10 Years of B-Sides and Rarities, released in 2004.

Two Nico tribute concerts took place in Europe in the autumn of 2008 to commemorate the 70th anniversary of Nico's birth and the 20th anniversary of her death. On 11 October 2008, John Cale, James Dean Bradfield (of Manic Street Preachers), Fyfe Dangerfield of The Guillemots and others appeared on stage at the Royal Festival Hall in London. On 17 October 2008 at the Volksbuehne in Berlin, Nico's ex-boyfriend Lutz Ulbrich presented another tribute concert, which featured Marianne Rosenberg, Soap & Skin, Marianne Enzensberger and James Young, the keyboardist from The Faction, Nico's last band. Nico's son, Ari Boulogne (sometimes called Ari Päffgen), made a brief appearance on stage at the close.

The Scooby-Doo! Mystery Incorporated episode "Art of Darkness" featured a parody of Nico named Eeko.

In January 2013 John Cale will mount a tribute A Life Along the Borderline at the Brooklyn Academy of Music in New York City. Performers include Kim Gordon and Sharon Van Etten.