Nezha was born during the Shang dynasty in a military fortress at Chentang Pass. His father was a military commander named Li Jing, who later became the "Pagoda-wielding Heavenly King". Nezha's mother, Lady Yin, gave birth to a ball of flesh after being pregnant with him for three years and six months. Li Jing thought that his wife had given birth to a demon and attacked the ball with his sword. The ball split open and Nezha jumped out as a boy instead of an infant. Nezha could speak and walk immediately after birth. He was later accepted by the immortal Taiyi Zhenren as a student. He had two older brothers, Jinzha, a disciple of Wenshu Guangfa Tianzun, and Muzha.

One day, the people of Chentang Pass asked for rain, and sacrificed much food to the East Sea Dragon King Ao Guang. The King rejected the food, instead wanting girls and boys to eat. He sent Ye Sha to capture for him a girl and boy. Nezha and two other children were playing by the sea when Ye Sha appeared and captured one of Nezha's friends. Nezha then fought him and injured him severely, causing him to return to the King and beg for someone else to take care of Nezha. The Dragon King sent Ao Bing, his third son, but the latter was slain by Nezha. Ao Guang called for his brothers and confronted Nezha and his family. He threatened to flood Chentang Pass and report Nezha to the Jade Emperor. To save his family and the people, Nezha committed suicide himself then carving up his own flesh and dismembering his bones "returning" these to his parents in repayment for the debt of his birth. The Dragon Kings then hosted a huge celebration.

After Nezha had committed suicide to return his body to his parents, he appeared in his mother's dream. In the dream, he asked her to build a temple for him, so that his soul would have a place to rest. This constitutes a link to Nezha's birth because the night before Nezha was born, Lady Yin had a dream where a Taoist put something into her bosom and told her to take this child. For both incidences, a dream was used to communicate a message.

His mother then secretly built a temple for Nezha and this temple later flourished. This temple became very well known and grew vastly because Nezha granted miracle cures to the sick and the crippled. However, Li Jing soon found out about this temple and burnt it down because he was still angry at Nezha and felt that he had already caused too much trouble for their family.

Li Jing burning the temple caused Nezha to desire his father's death. Thus, enmity between father and son grew. Nezha was later brought back to life by his teacher, Taiyi Zhenren, who used lotus roots to construct a human body for his soul and gave him two new weapons: the Wind Fire Wheels (風火輪) and the Fire-tipped Spear (火尖槍). With the reincarnation of Nezha by his master, Li Jing and Nezha fought many battles. However, Li Jing soon realized that his mortal body was no match for Nezha and so he ran for his life. On the run, he met his second son, Muzha, who fought and was defeated by Nezha. At this, Li Jing tried to commit suicide but was saved by Wenshu Guangfa Tianzun, who also contained Nezha. In the end, Nezha was forced to submit to his father by another deity, Randeng Daoren.

Nezha is often depicted as a youth, instead of an adult. He is often shown flying in the sky riding on the Wind Fire Wheels (風火輪), has the Universe Ring (乾坤圈) around his body (sometimes in his left hand), the Red Armillary Sash (浑天绫) around his shoulders and a Fire-tipped Spear (火尖槍) in his right hand. Sometimes, he is shown in his "three heads and six arms" form (三頭六臂). He has the ability to spit rainbows in some legends.