Neilson was born in Philadelphia, Pennsylvania to William George Neilson (a metallurgical engineer) and Mary Louise Neilson. She attended Bryn Mawr College, from which she received an A.B. in 1893, an A.M. in 1894, and a Ph.D. in 1899. She studied under Charles McLean Andrews at Bryn Mawr, and spent a year of her Ph.D. studies in England, where she studied under Frederic Maitland and Paul Vinogradoff. Neilson would later credit Andrews with encouraging her to study history rather than English literature.
She taught at Agnes Irwin School in Philadelphia from 1897 to 1900, and lectured at Bryn Mawr from 1900 to 1902. In 1902 she moved to Mount Holyoke College as an instructor in history, and in 1904 was appointed professor of European history there. She rose to the rank of full professor in 1905, and stayed in that position until retiring from teaching in 1939. Neilson graduated from Bryn Mawr – and later worked at Holyoke – with fellow medievalist Bertha Putnam.
In 1926 she was elected a fellow of the Medieval Academy of America, the first woman so elected; and in 1943 she served as the president of the American Historical Association, the first woman to do so.
She died in 1947 in South Hadley, Massachusetts.
Neilson's first major work was her doctoral dissertation, Economic Conditions on the Manors of Ramsey Abbey, in which she investigated the economic affairs of the lands held by Ramsey Abbey in the Middle Ages. She continued to be primarily concerned with the development of rural medieval England thereafter. She edited three surveys of the lands owned by English monasteries, focusing particularly on the economic and social conditions surrounding them. In addition, she wrote some volumes for nonspecialists and some works on medieval legal systems.
- Economic Conditions on the Manors of Ramsey Abbey (1899)
- Customary Rents (1910)
- Survey of the Honour of Denbigh (1914)
- The Terrier of Fleet Lincolnshire (1920)
- The Cartulary of Bilsington Kent (1927)
- Mediaeval Agrarian Economy (1936)
- Gras, N.S.B.; Lunt, William E.; and Strayer, J.R. (1950). "Nellie Neilson (in Memoirs of Fellows and Corresponding Fellows of the Mediaeval Academy)". Speculum 25 (3): 417–418.
- Scanlon, Jennifer; Cosner, Shaaron (1996). "Neilson, Nellie". American Women Historians, 1700s–1900s: A Biographical Dictionary. Greenwood Press. p. 166. ISBN 0-313-29664-2.
- Vaughan, Gerald (2000). "The Enigma of Mount Holyoke's Nellie Neilson". Historical Journal of Massachusetts 28: 186–212.