Nikki Reed was born in Los Angeles, California, the daughter of Cheryl Houston, a hairdresser, and Seth Reed, a set designer. Reed has described her home life as "complicated". She attended Palms Middle School. Her parents divorced when she was two, and she grew up with her mother. She describes herself as having been "shy and a bookworm", but at the age of twelve she became rebellious and emotionally volatile. The relationship between Reed and her mother became strained when Reed experimented with drugs, alcohol, and sex. At the age of fourteen, Reed moved out and began living on her own. She had no specific desire to become an actress.

Reed and director Catherine Hardwicke finished the script for the semi-biographical film, Thirteen, in six days, a relatively fast time for a Hollywood script to be written. Producers asked Reed to play a role in the film because they had trouble casting it, considering it an "uncomfortable" role for most young actresses. The film, starring Evan Rachel Wood was released in 2003 to glowing reviews, giving Reed recognition in Hollywood as both an actress and a screenwriter. Following the film's release, Reed also appeared on The Ellen DeGeneres Show, and hosted a number of award shows, including the Young Hollywood Awards (2003), and the Independent Spirits Awards Nomination Show, followed by the West Independent Spirits Awards, both in 2004.

Nikki has continued to participate in racy roles that involve the portrayal of sexually promiscuous teenagers, including Lords of Dogtown, also directed by Hardwicke. Her most recent film role is in Mini's First Time, which received a limited release in the United States on July 14, 2006. In the film, Reed plays a teenager who, through seduction, involves her stepfather in a plot to murder her mother. Reed has noted that her character does not "understand the weight of consequence". On February 12, 2008, it was announced that Reed would be portraying Rosalie Hale in the movie version of Twilight, which is also being directed by Catherine Hardwicke.