Born Rolf Åke Mikael Nyqvist in Stockholm, Sweden, it wasn't until he was over a year old when he was finally adopted from the orphanage he had been given to. His father was a lawyer and his mother a writer. It wasn't until he had his first child that he decided to seek out his biological parents. After a long journey, he met his biological mother who is Swedish and is now close to his biological father who is Italian and a pharmacist.

Acting wasn't always originally on the agenda for Nyqvist. A career in hockey was desired until an injury lead to an early retirement. At the age of 17, Nyqvist went to Omaha, Nebraska in America as an exchange student for a year. This is where his passion for acting first sparked. He took his first acting classes and played in addition to other roles, a part in a school version of the drama Death of a Salesman by Arthur Miller.

However, upon returning to Sweden he got accepted into Ballet school but after one year gave it up insisting he was too "stiff" and twirls and twists were not for him. An ex-girlfriend suggested to try theatre instead and at 19 years old, he was accepted into the Swedish Academic School of Drama in Malmö. He then went onto work mainly in theatre but also had several parts in film productions.

He became well known for his role as police officer Banck in the first series of Beck (1997) films made in 1997. His big breakthrough in European cinema came three years later, as he starred as Rolf, an alcoholic and abusive husband, in a film by Lukas Moodysson called Together (2000). This role landed him his first Guldbagge nomination (Best Supporting Actor) and won him the Best Actor award at the Gijón International Film Festival.

The accolades, awards and nominations flowed on from there. In 2002, Nyqvist played the leading man in the Swedish romantic comedy-drama, Grabben i graven bredvid (2002) directed by Kjell Sundvall and based on the novel of the same name written by Katarina Mazetti. He won a Best Actor Guldbagge award for his performance. The following year, Nyqvist starred as the leading role in As It Is in Heaven (2004) which was Academy Award nominated for Best Foreign Film and his performance as an internationally renowned, struggling conductor earned Nyqvist his second nomination for a Best Actor Guldbagge award. In 2006, he was nominated for a Best Supporting Actor Guldbagge award for his role in the film Mother of Mine (2005).

Over the next few years he went on to star in several other films and plays as part of the Royal Dramatic Theatre. A notable role that Nyqvist portrayed was that of Swedish ambassador Harald Edelstam in the film The Black Pimpernel (2007). Edelstam was a hero that saved several lives from execution in Chile during and after the military coupe in September 1973.

In 2008, it was announced that Nyqvist was chosen to star as Mikael Blomkvist of the literary phenomenon, the Millennium Trilogy written by Stieg Larsson. It was long speculated by Scandinavian tabloids that fellow Swedish actor, Mikael Persbrandt could be chosen for the role of Blomkvist until Niels Arden Oplev claimed that 'he would not have been right for the role.' Oplev needed 'a humanist with his heart in the right place, a Swedish teddy bear whom women would feel safe in his arms...a man who respects women, regardless of what type they are.' Nyqvist's capabilities as an actor and his public persona scored him the role.

The Girl with the Dragon Tattoo (2009) and its sequels, The Girl Who Played with Fire (2009) and The Girl Who Kicked the Hornet's Nest (2009) were released in 2009 throughout Europe and in the following year, throughout the rest of the world. The Girl with the Dragon Tattoo has garnered international critical acclaim. Oplev, Noomi Rapace (who starred as Lisbeth Salander, female protagonist of the trilogy) and Nyqvist all gained international recognition. Nyqvist said that his role as Blomkvist 'put me on the map internationally.' As a result he starred in two major Hollywood action movies as the leading villain: Mission: Impossible - Ghost Protocol (2011) as Hendricks, and John Wick (2014) as Tarasov. He made other movies in English, and continued to work in Swedish language projects.

He appeared in two films based on novels by well-known Swedish crime writer Henning Mankell, Kennedy's Brain (2010) and The Man from Beijing (2011). There was speculation and talk from Mankell that Nyqvist would be his first choice to play Swedish Prime Minister Olof Palme, who was assassinated in 1986, but that project never materialized. Instead, one of his final appearances was as a man who was politically the opposite of Palme: in Madiba (2017) he played Hendrik Verwoed, the architect of apartheid in South Africa.

Michael Nyqvist was diagnosed with lung cancer, and he passed away of the disease in Stockholm in June 2017, aged 56.

He was married to set designer, Catharina Ehrnrooth and had two children Ellen (born in 1991) and Arthur (born in 1996).