Nanda was born in a Maharashtrian show-business family to Vinayak Damodar Karnataki (Master Vinayak), a successful Marathi actor-director. Her father died when Nanda was a child. The family faced hard times. She became a child artiste and helped them by working in films like Jaggu in the early 1950s. She was tutored at home by renowned schoolteacher and Bombay Scouts commissioner, Gokuldas V. Makhi. Her brother is Marathi film director Jaiprakash Karnataki and Jayashree Talpade is her sister-in-law.
Nanda's paternal uncle V. Shantaram gave Nanda a big break by casting her in a successful brother-sister saga Toofan Aur Diya (1956). She received her first Filmfare Award nomination as Best Supporting Actress for Bhabhi (1957); she claims that the reason she didn't win was because there was lobbying involved. She then played supporting roles to stars like Dev Anand in Kala Bazar,and did small roles in big films like Dhool Ka Phool.
She played the title role in L.V. Prasad's Chhoti Bahen (1959). The movie was a big hit, making her a star. She then played lead roles, such as one of Dev Anand’s heroines in Hum Dono (1961) and Teen Deviyan. Both films were acclaimed as 'hits'. She was the heroine in B R Chopra's Kanoon (1960), a film that was very unusual back then, because it had no songs. She won the Filmfare Best Supporting Actress Award for Anchal (1960).
Nanda was known to encourage newcomers. She signed 8 films with Shashi Kapoor at a time when he was yet to become successful in Hindi Cinema. Their first 2 films as a pair - the critically acclaimed romantic film Char Diwari (1961) and "Mehndi Lagi Mere Haath" (1962) - did not work but the rest were successful at the box office. Shashi, who though had achieved success in English films in 1963 and in 2 Hindi films in 1965, had 5 flops as solo lead hero from his debut in 1961 till 1965 in Hindi films. In Jab Jab Phool Khile (1965), Nanda played a westernised role for the first time and it helped her image. Her favorite song that was famously picturized on her in the film was "Yeh Samaa." Shashi would later declare that Nanda was his favorite heroine. Nanda, too, declared Kapoor as her favourite hero. In early seventies, it was Nanda who suggested Rajendra Kumar, co-producer of The Train, to take Rajesh Khanna as the main lead.
She had another hit film in 1965 with Gumnaam, which helped put her in the top league of heroines. With Manoj Kumar, she further worked in Mera Kasoor Kya Hai. She played heroine roles throughout the 1960s but offers dried up in early 70s. She signed with new leading man Rajesh Khanna in the songless suspense thriller Ittefaq (1969) for which she received a Filmfare nomination as Best Actress. After Khanna became a super-star, he signed two more films with her: the thriller The Train (1970) and a comedy Joroo Ka Ghulam (1972) which became hits. Jeetendra, too, had some hit films with her like Parivar, Dharti Kahe Pukarke Ke; with Sanjay Khan, she had a hit in Beti and Abhilasha.
After a small role in Manoj Kumar's Shor (1972), Nanda did few more films such as Chhalia (1973), Naya Nasha (1974), which flopped and she then stopped acting. In 1982, she came back with three successful films, all coincidentally having her play Padmini Kolhapure's mother in Ahista Ahista, Mazdoor and Raj Kapoor's Prem Rog. Then she permanently retired from acting career.
She has been close friends with actress Waheeda Rehman, ever since they co-starred in Kaala Bazaar. In 1965, when she was filming Jab Jab Phool Khile, director Suraj Prakash recalled that a very handsome Maharashtrian lieutenant colonel was smitten by Nanda and had asked him to forward his marriage proposal to her mother. In the end, nothing came of it. Nanda's brothers also brought home many suitors for her, but she turned them down.
In 1992, a middle-age Nanda became engaged to director Manmohan Desai at the urging of Rehman. But he died after falling from the terrace of his rented flat in Girgaon, just a year after her mother died of cancer. According to reports, the railing he was leaning on collapsed. Nanda has remained unmarried.
Nanda lived in her residence in Mumbai interacting only with family and close friends, such as Waheeda Rehman, Asha Parekh, Helen, Saira Banu. After a long time she made a public appearance with Waheeda Rehman for a screening of the Marathi film Natarang (2010). She died in Mumbai on 25th March 2014 following a heart attack at her Versova Residence.