By 1958, Nilsson was intrigued by emerging forms of popular music, especially rhythm and blues artists like Ray Charles. He had made early attempts at performing while he was working at the Paramount, forming a vocal duo with his friend Jerry Smith and singing close harmonies in the style of the Everly Brothers. The manager at a favorite hangout gave Nilsson a plastic ukulele, which he learned to play, and he later learned to play the guitar and piano. In the 2006 documentary Who Is Harry Nilsson (And Why Is Everybody Talkin' About Him)?, Nilsson recalled that when he could not remember lyrics or parts of the melodies to popular songs, he created his own, which led to writing original songs.

Because of the poor financial situation of his family, Nilsson worked from an early age, including a job at the Paramount Theatre in Los Angeles. When the theatre closed in 1960, he applied for a job at a bank, falsely claiming he was a high school graduate on his application (he only completed ninth grade). He had an aptitude for computers, which were beginning to be employed by banks at the time. He performed so well the bank retained him even after uncovering his deception regarding being a high school graduate. He worked on bank computers at night, and in the daytime pursued his songwriting and singing career.

Uncle John's singing lessons, along with Nilsson's natural talent, helped when he got a job singing demos for Songwriter Scott Turner in 1962. Turner paid Nilsson five dollars for each track they recorded. (When Nilsson became famous, Turner decided to release these early recordings, and contacted Nilsson to work out a fair payment. Nilsson replied that he had already been paid – five dollars a track.).

In 1963, Nilsson began to have some early success as a Songwriter, working with John Marascalco on a song for Little Richard. Upon hearing Nilsson sing, Little Richard reportedly remarked: "My! You sing good for a white boy!" Marascalco also financed some independent singles by Nilsson. One, "Baa Baa Blacksheep", was released under the pseudonym "Bo Pete" to some small local airplay. Another recording, "Donna, I Understand", convinced Mercury Records to offer Nilsson a contract, and release recordings by him under the name "Johnny Niles."

Nilsson married Sandi McTaggart on October 24, 1964. They had no children other than his step-son, Scott Roberts. They divorced in 1967.

Nilsson signed with RCA Victor 1966 and released an album the following year, Pandemonium Shadow Show, which was a critical (if not commercial) success. Music industry insiders were impressed both with the songwriting and with Nilsson's pure-toned, multi-octave vocals. One such insider was Beatles press officer Derek Taylor, who bought an entire box of copies of the album to share this new sound with others. With a major-label release, and continued songwriting success (most notably with The Monkees, who had a hit with Nilsson's "Cuddly Toy" after meeting him through their Producer Chip Douglas), Nilsson finally felt secure enough in the music Business to quit his job with the bank. Monkees member Micky Dolenz maintained a close friendship until Nilsson's death in 1994.

Born in Brooklyn, Nilsson moved to Los Angeles as a teenager to escape his family's poor financial situation. While working as a computer programmer at a bank, he grew interested in musical composition and close-harmony singing, and was successful in having some of his songs recorded by various artists such as the Monkees. In 1967, he debuted on RCA Victor with the LP Pandemonium Shadow Show, followed with a variety of releases that include a collaboration with Randy Newman (Nilsson Sings Newman, 1970) and the original children's story The Point! (1971). His most commercially successful albums, Nilsson Schmilsson (1971) and Son of Schmilsson (1972), bore the international top 10 singles "Without You" (1971) and "Coconut" (1972). His only other top 10 hit, "Everybody's Talkin'" (1968), was a prominent song in the 1969 film Midnight Cowboy. A version of Nilsson's "One", released by Three Dog Night in 1969, also reached the U.S. top 10.

Pandemonium Shadow Show was followed in 1968 by Aerial Ballet, an album that included Nilsson's rendition of Fred Neil's song "Everybody's Talkin'". A minor US hit at the time of release (and a top 40 hit in Canada), the song would become more popular a year later when it was featured in the film Midnight Cowboy, and it would earn Nilsson his first Grammy Award. The song would also become Nilsson's first US top 10 hit, reaching #6, and his first Canadian #1.

Nilsson married Diane Clatworthy on December 31, 1969. They had one son, Zak Nine Nilsson. Nilsson and Clatworthy divorced in 1974.

Nilsson's next project was an animated film, The Point!, created with animation Director Fred Wolf, and broadcast on ABC television on February 2, 1971, as an "ABC Movie of the Week". Nilsson's self-produced album of songs from The Point! was well received and it spawned a top 40 single, "Me and My Arrow".

Nilsson followed quickly with Son of Schmilsson (1972), released while its predecessor was still in the charts. Besides the Problem of competing with himself, Nilsson was by then ignoring most of Perry's production advice and his decision to give free rein to his bawdiness and bluntness on this release alienated some of his earlier, more conservative fan base. With lyrics like "I sang my balls off for you, baby", "Roll the world over / And give her a kiss and a feel", and the notorious "You're breakin' my heart / You're tearin' it apart / So fuck you" (a reference to his ongoing divorce), Nilsson had traveled far afield from his earlier work. The album nevertheless reached #12 on the Billboard 200, and the single "Spaceman" was a Top 40 hit in October 1972. The follow-up single "Remember (Christmas)", however, stalled at #53. A third single, the tongue-in-cheek C&W send up "Joy", was issued on RCA's country imprint Green and credited to Buck Earle, but it failed to chart.

1973 found Nilsson back in California, and when John Lennon moved there during his separation from Yoko Ono, the two Musicians rekindled their earlier friendship. Lennon was intent upon producing Nilsson's next album, much to Nilsson's delight. However, their time together in California became known much more for heavy drinking than it did for musical collaboration. In a widely publicized incident, the two were ejected from the Troubadour nightclub in West Hollywood for drunken heckling of the Smothers Brothers.

Nilsson's 1970s London flat, at Flat 12, 9 Curzon Place on the edge of Mayfair, was a two-bedroom apartment decorated by the ROR ("Ringo or Robin") design company owned by Starr and interior designer Robin Cruikshank. Nilsson cumulatively spent several years at the flat, which was located near Apple Records, the Playboy Club, Tramp and the homes of friends and Business associates. Nilsson's work and interests took him to the US for extended periods, and while he was away he lent his place to numerous musician friends. During one of his absences, singer Cass Elliot, formerly of The Mamas & the Papas, and a few members of her tour group stayed at the flat while she performed solo at the London Palladium, headlining with her torch songs and "Don't Call Me Mama Anymore". Following a strenuous performance with encores on July 29, 1974, Elliot was discovered in one of the bedrooms, dead of heart failure at the age of thirty two.

Nilsson's voice had mostly recovered by his next release, Duit on Mon Dei (1975), but neither it nor its follow-ups, Sandman and ...That's the Way It Is (both 1976), met with chart success. Finally, Nilsson recorded what he later considered to be his favorite album Knnillssonn (1977). With his voice strong again, and his songs exploring musical territory reminiscent of Harry or The Point!, Nilsson anticipated Knnillssonn to be a comeback album. RCA seemed to agree, and promised Nilsson a substantial marketing campaign for the album. However, the death of Elvis Presley caused RCA to ignore everything except meeting demand for Presley's back catalog, and the promised marketing push never happened. This, combined with RCA releasing a Nilsson Greatest Hits collection without consulting him, prompted Nilsson to leave the label.

Nilsson married Una O'Keeffe on August 12, 1976; they remained married until his death on January 15, 1994. They had six children, including Annie, who is a singer/songwriter in her own right.

On September 7, 1978, The Who's Drummer Keith Moon returned to the same room in the flat after a night out, and died at 32 from an overdose of Clomethiazole, a prescribed anti-alcohol drug. Nilsson, distraught over another friend's death in his flat, and having little need for the property, sold it to Moon's bandmate Pete Townshend and consolidated his life in Los Angeles.

After a long hiatus from the studio, Nilsson started recording sporadically once again in the mid to late 1980s. Most of these recordings were commissioned songs for movies or television shows. One notable exception was his work on a Yoko Ono Lennon tribute album, Every Man Has A Woman (1984) (Polydor); another was a cover of "Zip-A-Dee-Doo-Dah" recorded for Hal Willner's 1988 tribute album Stay Awake: Various Interpretations of Music from Vintage Disney Films. Nilsson donated his performance royalties from the song to the Coalition to Stop Gun Violence.

In 1985 Nilsson set up a production company, Hawkeye, to oversee various film, TV and multimedia projects for which he was involved. He appointed his friend, satirist and Screenwriter Terry Southern, as one of the principals. They collaborated on a number of screenplays including Obits (a Citizen Kane-style story about a Journalist investigating an obituary notice) and The Telephone, a comedy about an unhinged unemployed actor.

The Telephone was virtually the only Hawkeye project that made it to the screen. It had been written with Robin Williams in mind but he turned it down; comedian-actress Whoopi Goldberg then signed on, with Southern's friend Rip Torn directing, but the project was troubled. Torn battled with Goldberg, who interfered in the production and constantly digressed from the script during shooting, and Torn was forced to plead with her to perform takes that stuck to the screenplay. Torn, Southern and Nilsson put together their own version of the film, which screened at the Sundance Film Festival in early 1988, but it was overtaken by the "official" version from the studio, and this version premiered to poor reviews in late January 1988. The project reportedly had some later success when adapted as a theatre piece in Germany.

In 1990, Hawkeye floundered and Nilsson found himself in a dire financial situation after it was discovered that his financial adviser Cindy Sims had embezzled all the funds he had earned as a recording Artist. The Nilssons were left with $300 in the bank and a mountain of debt, while Sims served less than two years and was released from prison in 1994 without making restitution.

In 1991, the Disney CD For Our Children, a compilation of children's music performed by celebrities to benefit the Elizabeth Glaser Pediatric AIDS Foundation, included Nilsson's original composition "Blanket for a Sail," recorded at the Shandaliza Recording Studio in Los Angeles.

Nilsson made his last concert appearance September 1, 1992, when he joined Ringo Starr & His All-Starr Band on stage at Caesars Palace in Las Vegas, Nevada to sing "Without You" with Todd Rundgren handling the high notes. Afterwards, an emotional Starr embraced Nilsson on stage.

Nilsson suffered a massive heart attack on February 14, 1993. After surviving that, he began pressing his former label, RCA Records, to release a boxed-set retrospective of his career, and resumed recording, attempting to complete one final album. He finished the vocal tracks for the album with Producer Mark Hudson, who has the tapes of that session. Nilsson died of heart failure on January 15, 1994 in his Agoura Hills, California home, aged 52. In 1995, the 2-CD anthology he worked on with RCA, Personal Best, was released.

Aerial Ballet also contained Nilsson's version of his own composition "One", which was later taken to the top 5 of the US charts by Three Dog Night and also successfully covered in Australia by John Farnham. Nilsson was also commissioned at this time to write and perform the theme song for the ABC television series The Courtship of Eddie's Father. The result, "Best Friend", was very popular, but Nilsson never released the song on record; the original version of the song (entitled "Girlfriend") was recorded during the making of Aerial Ballet but not included on that LP, and it eventually appeared on the 1995 Personal Best anthology, and as a bonus track on a later release of Aerial Ballet. Late in 1968, The Monkees' notorious experimental film Head premiered, featuring a memorable song-and-dance sequence with Davy Jones and Toni Basil performing Nilsson's composition "Daddy's Song." (This is followed by Frank Zappa's cameo as "The Critic," who dismisses the 1920s-style tune as "pretty white.")

Nilsson is the subject of a 2006 documentary, Who Is Harry Nilsson (And Why Is Everybody Talkin' About Him)? produced by David Leaf and John Schienfeld. The film was screened in 2006 at the Seattle International Film Festival and the Santa Barbara International Film Festival. In August 2006, the film received its Los Angeles premiere when it was screened at the 7th Annual Mods & Rockers Film Festival followed by a panel discussion about Nilsson featuring the filmmakers and two friends of Nilsson, Producer Richard Perry and attorney/executive Producer Lee Blackman.

The filmmakers re-edited the film with rare found footage of Nilsson, further interviews, and family photographs, and finally released it on September 17, 2010 at selected theaters in the United States. A DVD, including additional footage not in the theatrical release, was released on October 26, 2010.

On July 29, 2013, Sony Music released a definitive box-set of his RCA era albums called The RCA Albums Collection. Each of the albums in the 17-CD set had additional bonus tracks, along with 3 of the 17 discs that contained rarities and outtakes spanning his entire career. Additionally, several weeks later on August 13, Flash Harry was finally issued on CD also featuring additional material. Completing the two CD releases, the first book written about Nilsson was published covering his life story.

Nilsson was voted No. 62 in Rolling Stone's 2015 list of the "100 Greatest Songwriters of All Time", where he was described as "a pioneer of the Los Angeles studio sound, a crucial bridge between the baroque psychedelic pop of the late Sixties and the more personal singer-songwriter era of the Seventies". The RIAA certified Nilsson Schmilsson and Son of Schmilsson as gold records, indicating over 500,000 units sold each. His honors include Grammy Awards for two of his recordings; Best Contemporary Vocal Performance, Male in 1970 for "Everybody's Talkin'" and Best Pop Vocal Performance, Male in 1973 for "Without You". In 1994, Nilsson died of a heart attack while in the midst of recording new material for a since-unreleased comeback album.