Nephi is located at the mouth of Salt Creek Canyon; the north peak of Mount Nebo is to the northeast and the Red Cliffs are to the southeast. The city covers an area of approximately four square miles.

As with most settlements in Utah, Nephi's founders were Mormons, and the name of the town came from the Book of Mormon. In the summer of 1851 Joseph L. Haywood and Jesse W. Fox, the territorial surveyor, were instructed by church leaders to lay out the town of Salt Creek, so named for the local salty stream. Haywood served as civic and spiritual leader in the area for three years. The settlers immediately began to clear ground and build homes. They also started schools for their children. Nephi boasted the third high school (and the first rural one) in the state in 1894. In 1879 a Presbyterian school was opened and later a Methodist school.