[1] It drains most of the northern Thompson Plateau, beginning near the very eastern edge of the plateau only 30 kilometres (19 mi) northwest of Kelowna, and flows from there more or less westward to feed Douglas Lake and Nicola Lake, with about 15 kilometres (9 mi) of the river's length between those two lakes.

From there the river flows 60 kilometres (37 mi) northwest to the Thompson, and is followed on that route by British Columbia Highway 8 and a spur line of the Canadian Pacific Railway.

The area upstream from Merritt is known as the Upper Nicola, and is home to the famous Douglas Lake Ranch as well as the people of the valley's namesake, Nicola, an important historic chief in early 19th Century British Columbia.

The terrain of the river's basin northeast and in the area of Merritt is broad rangeland valleys, with high semi-forested plateau uplands reached by relatively gentle slopes, up to and over 2,400 metres (7,900 ft).

The upper basin has a number of large lakes, the largest being Douglas Lake and Nicola Lake, Below Merritt, the valley-bottom of the Lower Nicola is much narrower, but has room enough for a constant meander for most of its length, with lush farmland and deciduous forest, flanked by steep hills rising through sage and dryland forest hills to the broad plateau uplands above.