Shortly after his friend and former bandmate began to play rock music with The Warlocks (subsequently renamed the Grateful Dead), Nelson joined the similarly inclined New Delhi River Band.

Although they lacked the managerial acumen and cultural cachet of the Grateful Dead and elected to remain in East Palo Alto, California unlike the former group, who soon relocated to the Haight-Ashbury district of San Francisco, the New Delhi River Band were considered to be the house band of The Barn (one of the region's few viable concert venues outside of San Francisco) in Scotts Valley, California by late 1966.

While performing with various ephemeral bluegrass groups (such as High Country, which enabled him to renew his friendship with Garcia) in early 1969, Nelson was recruited by the remaining rhythm section of Peter Albin and Dave Getz to serve as the lead guitarist of the reconstituted Big Brother and the Holding Company.

Before the group began to audition potential replacements for Janis Joplin, Garcia and fellow Palo Alto folk scene veteran John "Marmaduke" Dawson invited Nelson to serve as the lead guitarist for their new psychedelic country rock venture, the New Riders of the Purple Sage.

In the mid 1990s, Nelson formed his own group, the critically acclaimed David Nelson Band (aka DNB), whose original members included Bill Laymon (New Riders, Jefferson Starship, Harmony Grits, Gypsy Cowboy Band) on bass, Barry Sless (Cowboy Jazz, Phil Lesh and Friends, Kingfish) on lead and pedal steel guitar, Michael "Mookie" Siegel (Kingfish, Phil Lesh and Friends, Kettle Joe's Psychedelic Swamp Revue) on keyboards and accordion, and Arthur Steinhorn (Cowboy Jazz) on drums.