Lofgren learned to play the accordion at age five and studied jazz and classical music as a child. He switched to rock guitar at 15 and formed the band Grin in 1969 with bassist Bob Gordon, drummer Bob Berberich, and later his brother Tom Lofgren on guitar. Grin quickly built a reputation around Washington, D.C., and Neil Young and Crazy Horse guitarist Danny Whitten caught wind of them while touring in the area. Young invited Lofgren to play piano and sing on 1970's After the Gold Rush, and he also played on and wrote two songs for Crazy Horse's debut album the following year.
Instead of remaining with Young, Lofgren used the resulting exposure to get Grin a record contract. The group recorded three albums from 1971 to 1972, garnering critical praise but no sales. A move to A&M produced the lackluster Gone Crazy, which proved to be Grin's swansong; Lofgren accepted an invitation from Young to tour in 1973 and play on his Tonight's the Night album. Grin officially disbanded in mid-1974 owing to lack of success and financial problems. Lofgren was rumored to be under consideration as a replacement for Mick Taylor in the Rolling Stones; instead, he signed to A&M as a solo artist. His first two solo efforts, Nils Lofgren and Cry Tough, were all-around successes, and Lofgren made a name for himself on supporting tours through stunts such as performing while jumping on a trampoline.
Subsequent releases failed to develop Lofgren's sound any further, and he became more viable as a sideman than a solo performer. Following 1983's Trans tour with Young, Lofgren joined Bruce Springsteen's E Street Band, replacing Little Stevie Van Zandt in 1984, remaining there until the unit was dissolved in 1991.