Furtado was born on December 2, 1978, in Victoria, British Columbia, Canada. Her Portuguese parents, Antonio Jose Furtado and Maria Manuela Furtado, were born on Sao Miguel Island in the Azores and had immigrated to Canada in the late 1960s. Nelly was named after Soviet gymnast Nellie Kim. Her siblings are Michael Anthony and Lisa Anne.

Furtado's third album, named Loose, after the spontaneous, creative decisions she made while creating the album, was released in June 2006. In this album, primarily produced by Timbaland, Furtado experiments with sounds from R&B, hip hop, and 1980s music. Furtado herself describes the album's sound as punk-hop, described as "modern, poppy, spooky" and as having "a mysterious, after-midnight vibe... extremely visceral". She attributed the youthful sound of the album to the presence of her two-year-old daughter. The album received generally positive reviews from critics, with some citing the "revitalising" effect of Timbaland on Furtado's music, and others calling it "slick, smart and surprising".  Loose has become the most successful album of Furtado's career so far, as it reached number one, not only in Canada and the United States, but also several countries worldwide. The album produced her first number-one hit in the United States, "Promiscuous", as well as her first number-one hit in the United Kingdom, "Maneater". The single "Say It Right" eventually became Furtado's most successful song worldwide, due to its huge success in Europe and in the United States, where it became her second number-one hit. "All Good Things (Come to an End)" became her most successful song in Europe, topping single charts in numerous countries there. On February 16, 2007, Furtado embarked on the "Get Loose Tour". She returned in March 2007 to her hometown of Victoria to perform a concert at the Save-On Foods Memorial Centre. In honour of her visit, local leaders officially proclaimed March 21, 2007, the first day of spring, as Nelly Furtado Day. After the tour, she released her first live DVD/CD named Loose the Concert. On April 1, 2007, Furtado was a performer and host of the 2007 Juno Awards in Saskatoon, Saskatchewan. She won all five awards for which she was nominated, including Album of the Year and Single of the Year. She also appeared on stage at the Concert for Diana at Wembley Stadium in London on July 1, 2007, where she performed "Say It Right", "Maneater", and "I'm Like a Bird".  In 2007, Furtado and Justin Timberlake were featured on Timbaland's single "Give It to Me", which became her third number-one single in the U.S. and second in the UK. In late 2008, Furtado collaborated with James Morrison on a song called "Broken Strings" for his album Songs for You, Truths for Me. The single was released on December 8 and peaked at No.2 on the UK Singles Chart in early January. In 2008, she sang with the Italian group "Zero Assoluto" the ballad Win or Lose - Appena prima di partire, released in Italy, France and Germany and whose video was shot in Barcelona. Furtado made a guest appearance on Flo Rida's new album, R.O.O.T.S.. Furtado also made a guest appearance on Divine Brown's Love Chronicles, co-writing and singing on the background of the song "Sunglasses". Furtado married Cuban sound engineer Demacio "Demo" Castellon, with whom she had worked on the Loose album, on July 19, 2008.

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