According to the 2005 census, Nicaragua has a population of 5,483,400, an increase of 20% on the 1995 census figure of 4,357,099. Nicaraguans of European or mixed European and indigenous stock (mestizos) make up a combined 86% of the population, with about 69% being mestizos and 17% being of European descent (mostly Spanish, German, Italian and French).

In the nineteenth century, there had been a substantial indigenous minority, but this group was also largely assimilated culturally into the Hispanic mainstream. Primarily in the 19th century, Nicaragua saw several waves of immigration from other European nations. In particular the northern cities of Esteli and Matagalpa have significant 4th generation German communities. Most of the Mestizo and European descent population live in the western regions of the country as in the cities of Managua, Granada and Leon.

About 9% of Nicaragua's population is black, or afronicaragüense, and mainly resides in the country's sparsely populated eastern or Atlantic coast. The black population is mostly of West Indian (Antillean) origin, the descendants of indentured labourers brought mostly from Jamaica and Haiti when the region was a British protectorate. Nicaragua has the second largest black population in Central America after Panama. There is also a smaller number of Garifuna, a people of mixed Carib, Angolan, Congolese and Arawak descent. The remaining 5% is comprised of the unmixed descendants of the country's indigenous inhabitants.

Nicaragua's pre-Colombian population consisted of the Nahuatl-speaking Nicarao people of the west after whom the country is named, and six other ethnic groups including the Miskitos, Ramas and Sumos along the Caribbean coast. While very few pure-blooded Nicarao people still exist, the Caribbean peoples have remained distinct. In the mid-1980s, the government divided the department of Zelaya - consisting of the eastern half of the country - into two autonomous regions and granted the African and indigenous people of this region limited self-rule within the Republic.

There is also a small Middle Eastern-Nicaraguan community of Syrian, Armenian, Palestinian and Lebanese people in Nicaragua with a total population of about 30,000, and an East Asian community of Japanese, Taiwanese and Chinese people of almost 8,000. These minorities speak Spanish while maintaining their ancestral languages as well.

Spanish is spoken by about 90% of the country's population; Nicaraguans speak standard Iberoamerican Spanish with some similarities to Galician Spanish—structurally similar to Argentinian Spanish which uses "vos" instead of "tu" along with the "vos" conjugation, but with a different intonation. The black population of the east coast region has English as its first language. Several indigenous peoples of the east still use their original languages, the main ones being the Miskito, Sumo, and Rama indigenous groups.