According to the United States Census Bureau, the village has a total area of 0.7 square miles (1.9 km²), all of it land.
The village was founded on 7 June 1856 by Dr. Benneville Yeakel Shelly, under the L'Eau Qui Court Company, later replaced by the Niobrara Township Company. It was later named Niobrara after the river at whose mouth it is positioned. Niobrara, or Ní ubthátha kʰe in Ponca, means "horizontal spread-out water", or, loosely paraphrased, "level river". Early European settlers referred to the river as "running water", possibly based on a different Lakota name. However, Niobrara does not mean "running water".
In March 1881 the village was moved farther away, owing to a flood. In 1886 a school was built and by 1902 a railroad was too.
The Niobrara Island Park opened in 1910, until it was given to the State of Nebraska in 1930.
The town gained unfortunate notoriety in 1969, when three members of the Sage family — brothers Gary, 22; Gregory, 21; and Kelly, 19 — died in a Vietnam War naval accident. The brothers died when USS Frank E. Evans, the destroyer they were serving aboard, collided with and was sunk by the Australian aircraft carrier HMAS Melbourne in the South China Sea. The brothers, who had asked to serve together, were among 74 American crewmen to die in the incident. A memorial in Niobrara commemorates the brothers' sacrifice.
In 1973 the village was moved again, owing to another flood.
There were 184 households out of which 22.8% had children under the age of 18 living with them, 46.7% were married couples living together, 8.2% had a female householder with no husband present, and 41.8% were non-families. 39.7% of all households were made up of individuals and 22.8% had someone living alone who was 65 years of age or older. The average household size was 2.06 and the average family size was 2.72.
In the village the population was spread out with 22.7% under the age of 18, 3.4% from 18 to 24, 17.9% from 25 to 44, 32.2% from 45 to 64, and 23.7% who were 65 years of age or older. The median age was 49 years. For every 100 females there were 103.8 males. For every 100 females age 18 and over, there were 98.0 males.
The median income for a household in the village was $26,000, and the median income for a family was $36,250. Males had a median income of $26,042 versus $21,250 for females. The per capita income for the village was $15,299. About 9.3% of families and 13.8% of the population were below the poverty line, including 28.4% of those under age 18 and 7.4% of those age 65 or over.
The mascot of the high school is the Niobrara Lions.
The Niobrara river, which is right next to the town, actually courses through the Mormon Canal rather than its original riverbed.