Nicole Richie was born Nicole Camille Escovedo in Berkeley, California. Because of her birth surname, she is well-rumored to be the biological daughter of Afro-Latin American percussionist Peter Escovedo III, however her birth father has not been identified publicly. Her birth mother has been identified only as a woman who was employed as a backstage assistant on Lionel Richie's 1980 world tour; Escovedo was a member of Richie's band. In a November 15, 2005 CNN interview with Ryan Seacrest, Richie stated that her birth father (whom she declined to identify) was not a member of Lionel's band. Richie still speaks with her biological mother but has no contact with her biological father. Richie also denied that Escovedo was her biological father in a November 2005 Jane magazine interview.

Lionel Richie first met Nicole as a child playing tambourine on stage at a Prince concert. Richie became her guardian. At age two, Nicole went to live with Lionel Richie and his wife, Brenda Harv