The museum was founded in the late 19th century by Artur Hazelius, who also founded the open-air museum Skansen. It was, for a long time, part of the museum, until the institutions were made independent of each other in 1963.

The museum was originally (1873) called the Scandinavian Ethnographic Collection, from 1880 the Nordic Museum. When Hazelius established the open-air museum Skansen in 1891, it was the second such museum in the world.

For the museum, Hazelius bought or got donations of objects like furniture, clothes and toys from all over Sweden and the other Nordic countries; he emphasised the peasant culture, but his successors increasingly started to collect objects reflecting bourgeois and urban lifestyles as well. For Skansen, he collected entire buildings and farms.

Although the project did not initially get the government funding he had hoped, Hazelius received widespread support and donations and by 1898, the Society for the promotion of the Nordic Museum had 4,525 members. The Riksdag allocated some money for the museums in 1891 and doubled the amount in 1900, the year before Hazelius died.

Collections
The museum has over 1.5 million objects in its collections, including buildings such as the Julita farm in Södermanland, Svindersvik in Nacka, Tyresö Palace in Tyresö, and the chaplain farm at Härkeberga near Enköping.

The museum archive also houses an extensive collection of documents and approximately 6 million photographs dating from the 1840s until today. The museum research library contains 3,800 shelf meters of literature from the 16th century and onward.