The park derives its name from the Big Woods, a large, contiguous forested area covering much of southeast Minnesota prior to the 1840s, when European settlers began to establish farms in the territory,[2] and from Nedstrand in Tysvær, Norway,[3] of which Nerstrand is a namesake.

This mosaic of uses created patches where native animals and plants could survive and then recolonize other lots as usage changed over the years, resulting in the high quality of the habitat today.

However, the lots were divided among 169 owners, not all of whom even lived in Minnesota anymore, and buying enough land to log commercially proved to be so complicated that each company gave up.

By 1944 the USFS had title to 460 acres (190 ha) and a bill officially authorizing Nerstrand Woods State Park passed the next year.

A unique clause was inserted in the legislation giving the University of Minnesota the option to conduct forestry experiments in suitable park areas.

The Minnesota Department of Natural Resources purchased more of the woodlots during a series of offers starting in the 1950s, expanding the park to cover approximately two square miles, though some private inholdings remained.