He was a part of the Feyenoord team which won the 1980 Dutch Cup, and made his debut for the Danish national team under national team manager Sepp Piontek in November 1980. In 1984, Nielsen and Feyenoord won both the 1984 Eredivisie championship and Dutch Cup trophy. He was called up for the Danish national team at the 1984 European Championship. He played full time in Denmark's four games at the tournament, before the team was eliminated in the semi-finals. He was also called up for the 1986 World Cup, where he played three games as Denmark reached the quarter-finals. After seven seasons at Feyenoord, he left the club in 1986.
Moving on to defending Eredivisie champions PSV Eindhoven, Nielsen joined up with fellow Danish internationals Frank Arnesen and Jan Heintze. Nielsen helped PSV win three Eredivisie championships in a row from 1987 to 1989, as well as the three Dutch Cups in a row from 1988 to 1990. His most notable result with PSV, was winning the international 1988 European Cup, when SL Benfica from Portugal were beaten on penalty shootout in the final. Nielsen represented the Danish national team in the 1988 European Championship tournament. The tournament was a disappointment for the Danish team, though Nielsen was one of few older players who played up to standard. He ended his national team career in November 1989, having never scored in his 51 national team games.
After four seasons at PSV, he returned to Denmark to end his career in 1990. He joined former club Fremad Amager, where he spent a single season. He moved to B 1903 in 1991, and when the club merged to form F.C. Copenhagen in 1992, Nielsen went on to play for the new club. He was a part of the Copenhagen team which won the 1993 Danish Superliga championship, in its first season of existence. After that season, he moved to Næstved IF, where he ended his career. He managed Næstved, and later Dragør Boldklub, before starting his own business in Copenhagen.