The colt, trained by Doug O'Neill, scored an eighth straight victory and gave jockey Mario Gutierrez his second win from two rides in the race.
Nyquist held off the challenge of the fast-finishing Exaggerator, with Gun Runner third, before a 167,227 crowd.
The Kentucky Derby is the first leg of the US Triple Crown, won by American Pharoah last year.
Nyquist will now attempt to emulate American Pharoah by going on to win the Preakness Stakes and the Belmont Stakes.
It was a second triumph in the race, known as the Run for the Roses, for Gutierrez, O'Neill and owner J Paul Reddam, who succeeded four years ago with I'll Have Another.
"It was an amazing feeling. I have a 100 per cent record on Nyquist. I only had to push him out," said the jockey.
"If he sees something coming he keeps going as fast as he needs to go."
Unbeaten favourite Nyquist won the 142nd running of the Kentucky Derby at Churchill Downs.