Originally named "Monadnock No. 6," the town was granted in 1752 by Colonial Governor Benning Wentworth. It was first settled in 1767, at which time it was renamed "Packersfield," after a grantee, Thomas Packer, the sheriff at Portsmouth. It would be incorporated in 1774 by Governor John Wentworth. The name was changed in 1814 to "Nelson" in honor of Viscount Horatio Nelson, British admiral and naval hero.
Located on the height of land separating the watersheds of the Connecticut and Merrimack rivers, Nelson became primarily an agricultural community. But with streams rising from four ponds to provide water power, it also developed industry. The village of Munsonville, situated on the stage line at the outlet of Granite Lake, manufactured cotton cloth and chairs. The L.J. Colony Chair Company produced between 25,000 and 30,000 chairs annually, hiring women and children from local farms to weave the rattan seats and backs. At one time, Munsonville had 1,000 homesteads and 10 school districts. The mills have since closed, and Munsonville is today a resort of summer homes.
Nelson possesses a Guinness World Record for the longest-running public contradance; the event is held in Nelson's town hall each Monday night. The Apple Hill Center for Chamber Music, a classical chamber music group which attempts to bring members of cultures in conflict (such as Israelis and Palestinians) closer together through music, is also in Nelson.
The town is traversed by the Monadnock-Sunapee Greenway, a hiking trail that traverses the highlands of southern New Hampshire from Mount Monadnock in Jaffrey to Mount Sunapee in Newbury. The trail passes directly through the center of Nelson.
As of the census of 2000, there were 634 people, 247 households, and 162 families residing in the town. The population density was 29.0 people per square mile (11.2/km²). There were 400 housing units at an average density of 18.3/sq mi (7.1/km²). The racial makeup of the town was 97.48% White, 0.63% African American, 0.32% Native American, 0.16% from other races, and 1.42% from two or more races. Hispanic or Latino of any race were 1.58% of the population.
There were 247 households out of which 33.6% had children under the age of 18 living with them, 59.5% were married couples living together, 4.0% had a female householder with no husband present, and 34.4% were non-families. 26.3% of all households were made up of individuals and 6.5% had someone living alone who was 65 years of age or older. The average household size was 2.57 and the average family size was 3.19.
In the town the population was spread out with 27.1% under the age of 18, 6.2% from 18 to 24, 29.7% from 25 to 44, 26.3% from 45 to 64, and 10.7% who were 65 years of age or older. The median age was 39 years. For every 100 females there were 105.2 males. For every 100 females age 18 and over, there were 101.7 males.
The median income for a household in the town was $41,250, and the median income for a family was $59,464. Males had a median income of $40,577 versus $25,000 for females. The per capita income for the town was $31,625. About 9.2% of families and 12.2% of the population were below the poverty line, including 16.3% of those under age 18 and 3.2% of those age 65 or over.