In 1946, Nilsson made her debut at the Royal Opera in Stockholm with only three days' notice, replacing the ailing Agathe in Carl Maria von Weber's Der Freischütz. Conductor Leo Blech wasn't very kind to her and, as she wrote in her autobiography, she even contemplated suicide after the performance. In 1947 she claimed national attention as Verdi's Lady Macbeth under Fritz Busch. A wealth of parts followed, from Strauss and Verdi to Wagner, Puccini, and Tchaikovsky. In Stockholm she built up a steady repertoire of roles in the lyric-dramatic field, including Donna Anna, Aida, Lisa, Tosca, Venus, Sieglinde, Senta and the Marschallin, one of her favourite roles (though she later lamented that she was never asked to sing it outside of Stockholm), all sung in Swedish. In 1949 she sang Ariadne auf Naxos with Hjördis Schymberg and Elisabeth Söderström among others.

Under Fritz Busch's tutelage her career took wing. He was instrumental in securing her first important engagement outside Sweden, as Elettra in Mozart's Idomeneo at the Glyndebourne Festival in 1951. Her debut at the Vienna State Opera in 1953 was a turning point; she would be a regular performer there for more than 25 years. It was followed by Elsa in Wagner's Lohengrin at the Bayreuth Festival in 1954, then her first Brünnhilde in a complete Ring at the Bavarian State Opera, at the Munich Festival of 1954. Later she returned as Sieglinde, Brünnhilde, and Isolde until 1969.

She took the title role of Turandot, which is brief but requires an unusually big sound, to La Scala in Milan in 1958, and then to the rest of Italy. Nilsson made her American debut as Brünnhilde in Wagner's Die Walküre in 1956 with the San Francisco Opera. She attained international stardom after a performance as Isolde at the Metropolitan Opera in New York City in 1959, which made front page news. She said that the single biggest event in her life was being asked to perform at the opening of the 370th season at La Scala as Turandot in 1958. She became the first non-Italian to open a season at La Scala. She performed at many major opera houses in the world including Vienna, Berlin, the Royal Opera House at Covent Garden, Tokyo, Paris, Buenos Aires, Chicago, and Hamburg.

Nilsson appeared at the Metropolitan Opera 223 times in 16 roles. She sang two complete Ring cycles in the 1961–62 season, and another in 1974–75. She was Isolde 33 times, and Turandot 52. She played most of the other major Soprano parts: Aida, Tosca, the Dyer's Wife in Strauss's Die Frau ohne Schatten, Salome, Elektra, as Verdi's Lady Macbeth, Leonore in Beethoven's Fidelio, and both Venus and Elisabeth in Wagner's Tannhäuser. She memorably appeared as replacement Sieglinde to Rita Hunter's Brünnhilde in the 1970s. She appeared 232 times at the Vienna State Opera from 1954–82, and the Vienna Philharmonic, the company's orchestra, made her an honorary member in 1999. "If there ever was someone that one can call a real star today and a world-famous opera singer during her time then that was Frau Nilsson", said Ioan Holender, Director of the Vienna State Opera.

Nilsson was known for standing up to conductors. In a 1967 rehearsal of Die Walküre with Herbert von Karajan conducting, Nilsson responded to the gloomy lighting of the production by wearing a miner's helmet (complete with Valkyrian wings). When on some occasion von Karajan urged a retake "and this time with our hearts – that's where your wallet has its place", Nilsson replied, "I'm glad to know that we have at least one thing in Common, Maestro von Karajan!" When Georg Solti, in Tristan und Isolde, insisted on tempos too slow for Nilsson's taste, she made the first performance even slower, inducing a conductorial change of heart. After a tiff with Hans Knappertsbusch, Nilsson reported: "He called me by a name that begins with "A" and ends with 'hole'".

Beginning at the summer of 1968 at the Bayreuth Festival, Nilsson was obsessively stalked by a much younger American Actress and model, Nell Theobald, until Theobald's suicide nine years later in 1977. Nilsson recounted her experiences with Theobald at length in her memoir, La Nilsson, in which she referred to Theobald solely as "Miss N." The stalking incident was later featured in Opera News magazine and The New York Times.

Though a frequent visitor to the Metropolitan Opera, Nilsson did not always see eye to eye with its redoubtable general manager, Rudolf Bing (who was often said to dislike Wagner), nor with Conductor Herbert von Karajan. Subsequently, she made fewer New York appearances than hoped in the early 1970s and was virtually excluded from the Salzburg Festival. Her American career was derailed in the mid-1970s by US Internal Revenue Service claims filed for back taxes. Several years later a schedule of payments was worked out, and Nilsson's hiatus from the United States ended. When she returned, Donal Henahan wrote in the New York Times, "The famous shining trumpet of a voice is still far from sounding like a cornet."

Twice at the Met, Nilsson sustained injuries that kept her from performing. In February 1971, she sprained her ankle during a performance of "Elektra" that resulted in cancellation of one performance (that was replaced by a historical performance of Fidelio starring Christa Ludwig). Nilsson recovered to sing the broadcast performance of Elektra on 27 February. More seriously, in March 1974 she fell and dislocated her shoulder during a rehearsal of Götterdämmerung. While recuperating in her hospital room at Roosevelt Hospital she said, "other than my bruises and my black and blues I feel fine". Although able to sing Brünnhilde for the first two performances with her arm in a sling, her injury caused her to miss subsequent performances, including that season's Götterdämmerung broadcast. The New York Times' review of the production's 8 March opening night is reprinted in the Metropolitan Opera Archives.

She sang with the Sydney Symphony Orchestra in the all-Wagner concert that opened the Concert Hall of the Sydney Opera House in 1973.

Nilsson's autobiography, Mina minnesbilder (My memoirs in pictures) was published in Stockholm in 1977. She retired in 1984 to her childhood home in the Skåne province of southern Sweden, where her father had been a sixth-generation farmer and she had worked to grow beets and potatoes until she was 23. In an interview in the mid-1990s, she appeared happy, serene and as unpretentious as ever. "I've always tried to remember what my mother used to tell me", she said. "Stay close to the earth. Then when you fall down, it won't hurt so much."

In 1981, Sweden issued a postage stamp showing Nilsson as Turandot. She has received the Illis Quorum gold medal, today the highest award that can be conferred upon a Swedish citizen by the Government of Sweden. In 1988, The American-Scandinavian Foundation named their prize for promising young American opera Singers the Birgit Nilsson Prize. Nilsson personally chaired several competitions.

Nilsson died, aged 87, on 25 December 2005 at her home at Bjärlöv, a small village near Kristianstad in Skåne in the same county where she was born. No cause of death was released. She was survived by her husband Bertil Niklasson (died March 2007), a veterinary surgeon whom she had met on a train and married in 1948. They had no children.

Three years after Nilsson's death, in December 2008, the Birgit Nilsson Foundation announced that it would award a prize every two to three years to a concert or opera singer, a classical or opera Conductor, or a specific production by an opera company. The prize was funded by Nilsson herself. The foundation said that Nilsson had chosen the first winner, to be announced in early 2009.

On 20 February 2009, Spanish tenor Plácido Domingo was announced as the inaugural recipient of the prize, which carried with it a cash award of $1,000,000. The first award ceremony took place in the Royal Swedish Opera on 13 October 2009. King Carl XVI Gustaf of Sweden personally presented the prize to the designated winner. A jury has been set up by the foundation to make recommendations for Future prizes. The second winner of the Birgit Nilsson prize was Riccardo Muti, who received the award in Stockholm on 13 October 2011. On 9 April 2014 it was announced that the third recipient of the prize would be the Vienna Philharmonic.

On 6 April 2011, the Bank of Sweden announced that Nilsson's portrait will feature on the 500 kronor banknote, beginning in October 2016.

Nilsson recorded all of her major roles in major commercial recordings of the complete works, as well as about a dozen solo recitals of arias, art songs, concerts, and hymns—all were originally released on vinyl LP format and most have been reissued on CD or in digital format. Partly because of her availability to play Brünnhilde, Decca Records undertook the expensive project of making a studio recording of Wagner's four-opera Ring Cycle, conducted by Solti and produced by John Culshaw. The effort took seven years, from 1958 to 1965. A film of the proceedings made her a familiar image for arts-conscious television viewers.