[1][2] Nihalani was born on 19 December 1940 in Karachi, Sindh province (now in Pakistan) and his family migrated to India during the partition of 1947.

He graduated in cinematography from the Shree Jaya Chamrajendra polytechnic (the present Government Film and Television Institute)[3] in Bangalore in 1962.

He was associated with all the earlier films of Shyam Benegal and with the cinematography of Richard Attenborough's Oscar-winning period biographical drama Gandhi (1982).

In 1996, his script for Drohkaal was adapted by Kamal Haasan for its Tamil remake, Kuruthipunal, which subsequently became India's official entry for the 68th Academy Awards Best Foreign Language Film category.

[8] In 1997, he adapted Bengali novelist Mahasweta Devi's acclaimed novel by the same name to Hazaar Chaurasi Ki Maa.