[9] The Nicholson River rises below the Angora Range in the lower reaches of the Victorian Alps within the Great Dividing Range, near the small settlement of Marthavale, west of Ensay.

[8][11] The river is impounded by the Nicholson River Dam, that forms a water reservoir used for the supply of town water to Lakes Entrance, until 1995.

[12] In its lower reaches, the river is traversed by the Great Alpine Road, the Princes Highway, and the East Gippsland Rail Trail,[8] a shared purpose rail trail that was formerly the part of the Orbost railway line.

There are a number of Australian Aboriginal names for the river including: from the Brabralung language Yowen-burrun[2] and Dart'yung,[3] both meaning "root of water plant";[4] Geremoot, with no clearly defined meaning;[5] and in the Tatungalung language, Ngarrak walang, meaning "back-stone".

[6] The current name of the river was given by the early colonial explorer and pastoralist, Angus McMillan, who named the river in 1839 in honour of Charles Nicholson, who represented the Port Phillip District on the NSW Legislative Council and was later Colonial Secretary.