Nicholas was the son of Ingrid Ragnvaldsdotter, the dowager queen of Norway and her fourth husband Arne Ivarsson of Stårheim (Árni Ívarsson).
He fought on Magnus' side in the Battle of Ilevollene in 1180, just outside Nidaros, and appeared the following year as his spokesman in negotiations with King Sverre.
According to Sverris saga he was first made Bishop of Stavanger and then transferred to Oslo, but this is not supported by contemporary documents and is probably an attempt to discredit Nicholas.
During 1196, Nicholas was one of the leaders of the Bagler party together with the nobleman Reidar the Messenger from Viken and Sigurd Jarlsson, a bastard son of Erling Skakke.
After the defeat of the Bagler in the Battle of Strindafjord, Nicholas had to flee to Denmark and seems to have stayed there until Sverre's death and reconciliation between parties 1202.
The background for these conflicts were the unclear Norwegian succession laws, social conditions and the struggle between Church and King.