Nye worked in journalism as a young man, serving as first editor and later owner of several newspapers. Nye entered politics as a progressive Republican in 1924, when he unsuccessfully sought election to the U.S. House. When Senator Edwin F. Ladd died on June 22, 1925, Nye was appointed to fill the vacancy and in 1926 he was elected to fill the Senate seat. Nye, like his father before him, supported the political positions of Robert M. La Follette. Having been an editorial supporter of the agrarian reform movement, Nye supported legislation for agricultural price supports.

He established a reputation as "Gerald the Giant-Killer" in the Teapot Dome Scandal, when he uncovered the fact that Albert B. Fall, Warren G. Harding's interior secretary had uncompetitively leased a government oil field to Mammoth Oil Company in return for contributions to the Republican National Committee. He went on to investigate other instances where the corrupting influence of money on politics had gone unnoticed.

In 1934 Senator Nye headed an investigation of the munitions industry. Once again, he sniffed out corruption and created headlines by making connections between the wartime profits of the banking and munitions industries and America's involvement in World War I. Many Americans felt betrayed: perhaps the war hadn't been an epic battle between the forces of good (democracy) and evil (autocracy). This investigation of these "merchants of death" helped to bolster sentiments for isolationism.1 A leading member of the Nye Committee staff was Alger Hiss.

Nye was instrumental in the development and adoption of the Neutrality Acts passed between 1935 and 1937. When it became apparent that these laws would not prevent American involvement in the escalating European conflicts, he helped to establish the America First Committee to mobilize antiwar sentiments.

Nye again gained prominence in 1941 for his severe criticism of Hollywood film producers, whom he accused of peddling pro-war propaganda to the masses. The bombing of Pearl Harbor put an end to both the AFC and Nye's resistance to American participation in World War II.

His earlier antiwar stands now undercut his reputation, and he was defeated for re-election by a Democrat, John Moses, in 1944. He later worked for the Federal Housing Administration from 1960 to 1964, and on the staff of the Senate Committee on Aging from 1964 to 1968. He then practiced law in Washington, D.C. until his death.