Wood filler is ideal for filling nail holes in wood that will be sanded down and refinished after, while wood putty will work better for finished wood. Nail holes in drywall can be filled up using spackling, drywall mud or hot mud.
The following shows basic methods used when filling nail holes:
Holes in wood
If the wood will be refinished and sanded down, it will be a good idea to use stainable latex wood filler. Press as much of the filler into the hole, keeping in mind that the filler will shrink a bit once it dries up. It will be a good idea to leave a small mound of filler to compensate for filler shrinkage. Depending on how deep the hole is, the filler will be dry in a matter of minutes or it may take several hours. For finished wood, choose wood putty that closely matches the finish on the wood. Mixing two or more shades of putty will also work to better achieve a desired look.
Nail holes in drywall
Before filling in nail holes in a drywall, make sure that the paper around the hole is not sticking out. Use the thumbnail to work frayed pieces of drywall paper back into the hole. Place a mixed drywall mud or hot mud into the corner of a Ziploc bag and twist the corner of the bag as it will act as an applicator. Snip the tip of the corner of the bag with scissors and then apply the drywall mud directly into the hole.