The daughter of a civil servant, Nair was born in Bhubaneshwar, Orissa, a small town in India with one movie theater that "perennially showed Dr. Zhivago." As a child, she was "inspired" by mythological traveling theater—"the fuel of my first excitement about doing anything with the arts."

Having studied at Delhi University and worked in political theater in Calcutta and elsewhere, drawn to modern American playwrights such as Peter Brooks and Joseph Chaikin, and under the "illusion" that she was an academic, Nair came to Harvard as a sophomore on a full scholarship. Once here, Nair "stumbled into documentary filmmaking" after taking a course in photography at Harvard's Summer School and applying to the Visual and Environmental Studies department, then in its infancy. Feeling that "it’s not my personality to work in such isolation," Nair soon moved from photography to filmmaking. She discovered cinema verite at Harvard and MIT, and "got kind of hooked" by a medium that offered her "a way of working visually, working with people, and capturing something extraordinary about ordinary life." And, as she tells John Lithgow, "I felt blessed that at the age of twenty, I had found my place in life."