Nusrat Fateh Ali Khan was born on October 13, 1948 in the city of Faisalabad, Pakistan into a Punjabi family. He was the fifth child and first son of Fateh Ali Khan, a musicologist, vocalist, instrumentalist, and Qawwal. Khan's family, which included four older sisters and a younger brother, Farrukh Fateh Ali Khan, grew up in central Lyallpur. In 1979, Khan married his first cousin, Naheed (the daughter of Fateh Ali Khan's brother, Salamat Ali Khan); they had one daughter, Nida.
Khan began by learning to play tabla alongside his father before progressing to learn Raag Vidya and Bol Bandish. He then went on to learn to sing within the classical framework of khayal. Khan's training with his father was cut short when his father died in 1964, leaving Khan's paternal uncles, Mubarak Ali Khan and Salamat Ali Khan, to complete his training.
His first performance was at a traditional graveside ceremony for his father, known as chehlum, which took place forty days after his father's death.
In 1971, after the death of Mubarak Ali Khan, Nusrat became the official leader of the family Qawwali party and the party became known as Nusrat Fateh Ali Khan, Mujahid Mubarak Ali Khan & Party.
Khan's first public performance as the leader of the Qawwali party was at a studio recording broadcast as part of an annual music festival organised by Radio Pakistan, known as Jashn-e-Baharan. Khan sang mainly in Urdu and Punjabi and occasionally in Persian, Brajbhasha and Hindi. His first major hit in Pakistan was the song Haq Ali Ali, which was performed in a traditional style and with traditional instrumentation. The song featured restrained use of Nusrat's sargam improvisations.
Early in his career, Khan was signed up by Oriental Star Agencies [OSA] of Birmingham UK to their Star Cassette Label. OSA sponsored regular concert tours by Nusrat to the U.K. from the early '80s onwards, and released much of this live material on cassette, CD, videotape and DVD.

Khan teamed with Peter Gabriel on the soundtrack to The Last Temptation of Christ in 1985, with Canadian musician Michael Brook on the albums Mustt Mustt (1990) and Night Song (1996), and with Pearl Jam lead singer Eddie Vedder in 1995 on two songs for the soundtrack to Dead Man Walking. He also contributed to the soundtrack of Natural Born Killers.
Peter Gabriel's Real World label later released five albums of Nusrat's traditional Qawwali, together with some of his experimental work which included the albums Mustt Mustt and Star Rise. Nusrat provided vocals for The Prayer Cycle, which was put together by Jonathan Elias, but died before the vocals could be completed. Alanis Morissette was brought in to sing with his unfinished vocals. Nusrat also collabrated with Michael Brook to create music for the song 'Sweet Pain' used in the movie Any Given Sunday. He also performed traditional Qawwali before international audiences at several WOMAD world music festivals and the single Dam Mast Qalandar was remixed by electronic trip hop group Massive Attack in 1998.
His album Intoxicated Spirit was nominated for a Grammy award in 1997 for best traditional folk album.
Khan contributed songs to, and performed in, several Pakistani films. Shortly before his death, he recorded a song each for two Bollywood films, Aur Pyaar Ho Gaya (in which he also sang the song onscreen) and Kachche Dhaage. He sang the title song of the film, Dhadkan. He also sang Saya bhi saath jab chhod jaye for Sunny Deol's movie, Dillagi. The song was released only in 1999, two years after Nusrat's death.
Khan contributed the song "Gurus of Peace" to the album Vande Mataram, composed by A.R. Rahman, and released to celebrate the 50th anniversary of India's independence. Rahman, who was a big fan of Khan could not do further songs with him. As a tribute, Rahman later released an album titled Gurus of Peace, which featured "Allah Hoo" by Nusrat. Rahman's 2007 song "Tere Bina" was also done as a tribute to Nusrat.
According to the Guinness Book of World Records, Nusrat Fateh Ali Khan holds the world record for the largest recorded output by a Qawwali artist—a total of 125 albums as of 2001.

Khan was taken ill with kidney and liver failure on August 11, 1997 in London, England while on the way to Los Angeles in order to receive a kidney transplant. He died of a sudden cardiac arrest at Cromwell Hospital, London, on Saturday, August 16, 1997, aged 48.[unreliable source?] His body was returned to Faisalabad, Pakistan and his funeral was attended by the public.
After his death, the song "Solemn Prayer", on which Nusrat provided vocals, was used on the Peter Gabriel song 'Signal to Noise' (on the album Up), and on the soundtrack to the Martin Scorsese film Gangs of New York.