Nystedt was born in Kristiania (now Oslo), Norway, and grew up in a Christian home where hymns and classical music were an important part of everyday life. His major compositions for choir and vocal soloists are mainly based on texts from the Bible or sacred themes. Old church music, especially Palestrina and Gregorian chants, have had a major influence on his compositions.
He studied with Aaron Copland among others. Nystedt was organist in Torshov kirke in Oslo from 1946 to 1982 and taught choir conducting at the University of Oslo from 1964 to 1985.
Nystedt founded and conducted Det Norske Solistkor from 1950 to 1990. He also founded and conducted Schola Cantorum from 1964 to 1985.
In 1966, the King of Norway made Nystedt a Knight of the Order of St. Olav in recognition of his contributions to Norwegian music, and in 2002 the King of Norway made him Commander of St. Olav. He received the Spellemann Award in 1978 for his album Contemporary Music From Norway and received the music prize of the Arts Council Norway in 1980. He died peacefully in his sleep on December 8th 2014 at the age of 99.
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