Furtado was born on December 2, 1978, in Victoria, British Columbia, Canada. Her Portuguese parents, Antonio Jose Furtado and Maria Manuela Furtado, were born on Sao Miguel Island in the Azores and had immigrated to Canada in the late 1960s. Nelly was named after Soviet gymnast Nellie Kim. Her siblings are Michael Anthony and Lisa Anne.

Furtado continued the collaboration with Eaton and West, who co-produced her debut album, Whoa, Nelly!, which was released in October 2000. The album was an international success, supported by three international singles: "I'm Like a Bird", "Turn Off the Light", and "...On the Radio (Remember the Days)". It received four Grammy nominations in 2002, and her debut single won for Best Female Pop Vocal Performance. Furtado's work was also critically acclaimed for her innovative mixture of various genres and sounds. Slant Magazine called the album "a delightful and refreshing antidote to the army of 'pop princesses' and rap-metal bands that had taken over popular music at the turn of the millennium". The sound of the album was strongly influenced by musicians who had traversed cultures and "the challenge of making heartfelt, emotional music that's upbeat and hopeful". According to Maclean's magazine, Whoa, Nelly! had sold six million copies worldwide as of August 2006. Portions of the song "Scared of You" are in Portuguese, while "Onde Estas" is entirely in Portuguese, reflecting Furtado's Portuguese heritage. Following the release of the album, Furtado headlined the "Burn in the Spotlight Tour" and also appeared on Moby's Area:One tour. In 2002, Furtado appeared on the song "Thin Line", on underground hip hop group Jurassic 5's album Power in Numbers. The same year, Furtado provided her vocals to the Paul Oakenfold song "The Harder They Come" from the album Bunkka. She also had a collaboration with Colombian artist Juanes in the song "Fotografia" ("Photograph"), where she showed her diversity of yet another language, Spanish. Furtado was also featured in "Breath" from Swollen Members' Monsters in the Closet release; the video for "Breath", directed by Spawn creator Todd McFarlane, won the 2003 Western Canadian Music Awards Outstanding Video and MuchVIBE Best Rap Video. In 2002, Furtado was the recipient of an International Achievement Award at the SOCAN Awards in Toronto for her song "I'm Like a Bird". Furtado's second album, Folklore, was released in November 2003. One of the tracks on the album, "Childhood Dreams", was dedicated to her daughter, Nevis. The album includes the single "Forca" (meaning "strength"/ "power" or "you can do it!" in Portuguese), the official anthem of the 2004 European Football Championship. Furtado performed this song in Lisbon at the championship's final, in which Portugal's national team played. The lead single released was "Powerless (Say What You Want)" and the second single was the ballad "Try". The album was not as successful as her debut, partly due to the album's less "poppy" sound, as well as underpromotion from her label DreamWorks Records. DreamWorks had just been sold to Universal Music Group at the time of the album's release. Eventually in 2005, DreamWorks Records, along with many of its artists, including Furtado, were absorbed into Geffen Records. "Powerless (Say What You Want)" was later remixed into a Spanish version called "Abre Tu Corazon", featuring Juanes, who had previously worked with Furtado on his track "Fotografia". The two would collaborate again on "Te Busque" ("I Searched for You"), a single from Furtado's 2006 album Loose. In 2003, Furtado won an International Achievement Award at the SOCAN Awards in Toronto for her song "Turn Off the Light".

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