Furtado was born on December 2, 1978, in Victoria, British Columbia, to Portuguese parents, Maria Manuela and António José Furtado, both immigrants from the Azores. She was named after Soviet gymnast Nellie Kim. Her parents were born on São Miguel Island and emigrated to Canada in the late 1960s. Her siblings are Michael Anthony and Lisa Anne. She was raised in a Roman Catholic home. At age four, she began performing and singing in Portuguese. Furtado's first public performance was when she sang a duet with her mother at a church on Portugal Day. She began playing musical instruments at the age of nine, learning the trombone, ukulele and – in later years – the guitar and keyboards. At the age of 12, she began writing songs, and as a teenager, she performed in a Portuguese marching band. Furtado has acknowledged her family as the source of her strong work ethic; she spent eight summers working as a chambermaid with her mother, along with her brother and sister, who was a housekeeper in Victoria. She has stated that coming from a working-class background has shaped her identity in a positive way.

During a visit with her sister Lisa Anne in Toronto, the summer after eleventh grade, Furtado met Tallis Newkirk, member of the hip hop group Plains of Fascination. She contributed vocals to their 1996 album, Join the Ranks, on the track "Waitin' 4 The Streets". After graduating from Mount Douglas Secondary School in 1996, she moved to Toronto to reside with her sister Lisa Anne. The following year, she formed Nelstar, a trip hop duo with Newkirk. Ultimately, Furtado felt the trip-hop style of the duo was "too segregated", and believed it did not represent her personality or allow her to showcase her vocal ability. She left the group and planned to move back home. In 1997, she performed at the Honey Jam talent show. Her performance attracted the attention of The Philosopher Kings singer Gerald Eaton, who then approached her to write with him. He and fellow Kings member Brian West helped Furtado produce a demo. She left Toronto, but returned again to record more material with Eaton and West. The material recorded during these sessions led to her 1999 record deal with DreamWorks Records, where she was signed by A&R executive Beth Halper, partner of Garbage drummer and record producer Butch Vig. Furtado's first single, "Party's Just Begun (Again)", was released that year on the Brokedown Palace: Music from the Original Motion Picture Soundtrack.

Furtado continued the collaboration with Eaton and West, who co-produced her debut album, Whoa, Nelly!, which was released in October 2000. The album was an international success, supported by three international singles: "I'm like a Bird", "Turn off the Light", and "...On the Radio (Remember the Days)". It received four Grammy nominations in 2002, and her debut single won for Best Female Pop Vocal Performance. Furtado's work was also critically acclaimed for her innovative mixture of various genres and sounds. Slant Magazine called the album "a delightful and refreshing antidote to the army of 'pop princesses' and rap-metal bands that had taken over popular music at the turn of the millennium". The sound of the album was strongly influenced by musicians who had traversed cultures and "the challenge of making heartfelt, emotional music that's upbeat and hopeful". According to Maclean's magazine, Whoa, Nelly! had sold six million copies worldwide as of August 2006. Portions of the song "Scared of You" are in Portuguese, while "Onde Estás" is entirely in Portuguese, reflecting Furtado's Portuguese heritage. Following the release of the album, Furtado headlined the "Burn in the Spotlight Tour" and also appeared on Moby's Area:One tour.

In 2002, Furtado appeared on the song "Thin Line", on underground hip hop group Jurassic 5's album Power in Numbers. The same year, Furtado provided her vocals to the Paul Oakenfold's song "The Harder They Come" from the album Bunkka and also made the song "These words are my own". She also had a collaboration with Colombian artist Juanes, in the song "Fotografia" where she showed her diversity of yet another language. Furtado was also featured in "Breathe" from Swollen Members "Monsters in the Closet" release; the video for "Breathe," directed by Spawn creator Todd MacFarlane, won the 2003 Western Canadian Music Awards Outstanding Video and MuchVIBE Best Rap Video. In 2003, in Toronto, Furtado gave birth to a daughter, Nevis Chetan Furtado, whose father is Jasper Gahunia. Furtado and Gahunia, who had been good friends for several years, remained together for four years until their breakup in 2005. Furtado told Blender magazine that they continue to be good friends and jointly share responsibility of raising Nevis.

Furtado's second album, Folklore, was released in November 2003. The final track on the album, "Childhood Dreams", was dedicated to her daughter, Nevis. The album includes the single "Força" (meaning "strength"/ "power" or "you can do it!" in Portuguese), the official anthem of the 2004 European Football Championship. Furtado performed this song in Lisbon at the championship's final, in which the Portugal national team played. The lead single is "Powerless (Say What You Want)" and the second single is the ballad "Try". The album was not as successful as her debut, partly due to the album's less "poppy" sound, as well as underpromotion from her label DreamWorks Records. DreamWorks had just been sold to Universal Music Group. In 2005, DreamWorks Records, along with many of its artists including Furtado, was absorbed into Geffen Records. "Powerless (Say What You Want)" was later remixed, featuring Colombian rocker Juanes, who had previously worked with Furtado on his track "Fotografía" ("Photograph"). The two would collaborate again on "Te Busqué" ("I searched for you"), a single from Furtado's 2006 album Loose.

Furtado's third album, named Loose, after the spontaneous, creative decisions she made while creating the album, was released in June 2006. In this album, primarily produced by Timbaland, Furtado experiments with sounds from R&B, hip hop, and 1980s music. Furtado herself describes the album's sound as punk-hop, described as "modern, poppy, spooky" and as having "a mysterious, after-midnight vibe... extremely visceral". She attributed the youthful sound of the album to the presence of her two-year-old daughter. The album received generally positive reviews from critics, with some citing the "revitalising" effect of Timbaland on Furtado's music, and others calling it "slick, smart and surprising". Some have labeled her a "sellout" for seemingly abandoning her folk and rock roots in favour of hip hop and R&B, while others have accused her of attempting to "sex up" her music and appearance to sell more records. Loose has become the most successful album of Furtado's career so far, as it reached number one, not only in Canada and the United States, but also several countries worldwide. The album produced her first number-one hit in the United States, "Promiscuous", as well as her first number-one hit in the United Kingdom, "Maneater". The single "Say It Right" eventually became Furtado's most successful song worldwide, due to its huge success in Europe and in the United States, where it became her second number-one hit. "All Good Things (Come to an End)" became her most successful song in Europe, topping single charts in numerous countries there.

In June 2006 in an interview with Genre magazine, when asked if she had "ever felt an attraction to women", Furtado replied "Absolutely. Women are beautiful and sexy". Some considered this an announcement of bisexuality, but in August 2006, she stated that she was "straight, but very open-minded". In November 2006, Furtado revealed that she once turned down $500,000 to pose fully clothed in Playboy. On February 16, 2007, Furtado embarked on the "Get Loose Tour". She returned in March 2007 to her hometown of Victoria to perform a concert at the Save-On Foods Memorial Centre. In honour of her visit, local leaders officially proclaimed March 21, 2007, the first day of spring, as Nelly Furtado Day. After the tour, she released her first live DVD/CD named Loose the Concert. On April 1, 2007, Furtado was a performer and host of the 2007 Juno Awards in Saskatoon, Saskatchewan. She won all five awards for which she was nominated, including Album of the Year and Single of the Year. She also appeared on stage at the Concert for Diana at Wembley Stadium in London on July 1, 2007, where she performed "Say It Right", "Maneater", and "I'm like a Bird". In 2007, Furtado and Justin Timberlake were featured on Timbaland's single "Give It to Me", which became her third number-one single in the U.S. and second in the UK. In late 2008, Furtado collaborated with James Morrison on a song called "Broken Strings" for his album Songs for You, Truths for Me. The single was released on December 8 and peaked at No.2 on the UK Singles Chart in early January. In 2008, she sang with the Italian group "Zero Assoluto" the ballad Win or Lose – Appena prima di partire, released in Italy, France and Germany and whose video was shot in Barcelona. Furtado made a guest appearance on Flo Rida's new album, R.O.O.T.S.. Furtado also made a guest appearance on Divine Brown's Love Chronicles, co-writing and singing on the background of the song "Sunglasses". Furtado married Cuban sound engineer Demacio "Demo" Castellón, with whom she had worked on the Loose album, on July 19, 2008.

Furtado's debut Spanish album, Mi Plan was released with the first single, "Manos Al Aire" ("Hands in the Air"). She had formed her own record label, Nelstar, in conjunction with Canadian independent label group Last Gang Labels. The first act signed to Nelstar is Fritz Helder & the Phantoms. "Manos al Aire" was released on the new label. The second, third and fourth singles were "Más", "Mi Plan" and "Bajo Otra Luz" respectively. Furtado won the Latin Grammy Award for Best Female Pop Vocal Album for Mi Plan. She is the first Canadian to win a Latin Grammy award. Furtado also recorded "Manos al Aire" in Simlish for the new Sims 3 expansion, World Adventures. Lifestyle, her planned fourth English studio album, was not released during the summer of 2010 in favor a second leg of her Mi Plan Tour. To promote the tour in Brazil, on March 24, 2010, Furtado made a "VIP Pocket Show" in reality show program Big Brother Brasil 10 from Rede Globo, the country's leading channel. Furtado participated in the live DVD recording of the Brazilian singer Ivete Sangalo in Madison Square Garden on September 4, 2010. Furtado released Mi Plan Remixes featuring 12 tracks of remixed hits from "Mi Plan." This album included the Original Spanglish Version of "Fuerte", her final release from Mi Plan.

Furtado made a guest appearance on Canadian singer k-os's new album Yes!, collaborating alongside Saukrates on the song "I Wish I Knew Natalie Portman," released in early July 2009. Nelly Furtado also made a guest appearance on Tiësto's single "Who Wants to Be Alone" on his new album Kaleidoscope. Furtado sang in a duet with Bryan Adams at the opening ceremonies of the 2010 Vancouver Winter Olympic Games. The song was called "Bang The Drum" released on EMI album Sounds Of Vancouver 2010 (a commemorative album). Furtado is featured in a new song by N.E.R.D. called "Hot N Fun". She also participated in the Young Artists for Haiti song, in which many Canadian artists came together and sang K'naan's inspirational song "Wavin' Flag" to raise money for the victims of the Haiti Earthquake. Furtado was honoured with a star on Canada's Walk of Fame in October 2010.

Furtado released her first greatest hits album titled The Best of Nelly Furtado on November 16, 2010. Three new songs were included on the greatest hits album, including "Night Is Young", "Girlfriend in the City", and the Lester Mendez produced track, left over from the Loose sessions, "Stars". The album's first single, "Night Is Young", was released on October 12, 2010. Furtado had previously sang two of the new songs: "Girlfriend in the City" and "Night Is Young" at her concert in Warsaw, Poland. Furtado was one of several celebrities who have come under fire after 2011 reports from the New York Times and a WikiLeaks document revealed several entertainers had received extravagant sums to perform for the family of Libyan ruler Muammar Gaddafi. She promised to donate to charity the $1 million she received for a 2007 concert, which ended up going to Free the Children.

Furtado publicly endorsed Green Party leader Elizabeth May in Saanich-Gulf Islands during the federal election in 2011. Furtado was featured on one of the Game's The R.E.D. Album tracks, titled "Mamma Knows" (produced by The Neptunes). For the Canadian film The Year Dolly Parton Was My Mom, Furtado lent her vocals for the Dolly Parton gospel cover "The Seeker" featured during the credits of the film. Furtado collaborated with recording artist Alex Cuba and K'naan once again. The duet with K'naan "Is Anybody Out There", was released as the first single from his extended play More Beautiful than Silence.

The Spirit Indestructible will be released in September 2012. Furtado proclaims that The Spirit Indestructible would be most like her 2000 debut Whoa, Nelly!, but containing elements from urban, alternative, and reggae. The influences for the album range from Janelle Monae, The xx, to Florence + the Machine. The album has attracted producers such as The Neptunes, Tiësto, Timbaland, Rick Nowels, Ryan Tedder and Rodney Jerkins. The first single from The Spirit Indestructable, "Big Hoops (Bigger the Better)", was released digitally on April 17, 2012 and was sent to North American radio stations on May 1, 2012. Furtado continued to collaborate with hip-hop producer Salaam Remi, who previously worked on the 2010 single "Night Is Young", on "The Edge". The lyrics for the Salaam Remi produced track are reported to be influenced by the Tiger Woods cheating scandal, in which was originally referred to as "Elin's Song". On July 2, 2011 Furtado performed a new track, an acoustic ballad titled "Mystery", from her upcoming studio album. Furtado intends on promoting the album for at least two years while embarking on a tour.

Furtado has simultaneously begun work on a full-length Portuguese album, as a follow-up to her Spanish effort, Mi Plan.