He and his family (father Göte, mother Daisy, the brothers Rolf and Bosse and sister Rose-Marie) moved to Partille, outside Gothenburg, before he started school, and he began his footballing career in Jonsereds IF at the age of seven or eight.

[1] Nilsson joined IFK Göteborg for the 1975 season, and helped the club climb back to the top tier of Swedish football, Allsvenskan, by winning Division 2 in 1976.

He then helped the team to a treble in 1982, the Swedish championship (IFK won both Allsvenskan and the title-deciding play-off), Svenska Cupen, and the UEFA Cup.

When he ended his playing career after three seasons due to knee problems,[3] Nilsson had led the club to another Swedish Championship, and nearly a European Cup final in 1986.

It is a mystery to a lot of Swedes how Nilsson with all his talent never really made it big when playing for PSV and Kaiserslautern, but according to himself he was too shy to make it in those rougher top club environments.

[4] Despite Nilsson's so-so stays abroad, and his short career in the Sweden national team – for whom he played only 28 matches and scored nine goals – he is considered to be one of the greatest Swedish footballers of all time.

[5][6] He declined to play for the national team for four years in the early 1980s when he was at his prime, the most important reason for this was that Nilsson not felt comfortable in the national team and the coach Lars Arnesson, who mixtured a lot with different formations, which did not suit the playing style that Nilsson liked.