Nicholson was lieutenant governor of Virginia until 1692, serving under the absentee Governor Lord Howard of Effingham. During this tenure, he was instrumental in the creation of the College of William and Mary and named as one of its original trustees. He worked to improve the provincial militia, and approved the establishment of additional ports of trade in the province. The latter was not without some opposition from some of the larger merchants in the province, who saw the additional ports as a competitive threat. During this time Nicholson was one of the only high-level representatives of Crown Rule in the colonies: most Crown Rule had been eliminated in the northern colonies, and the other southern colonies were governed by proprietary governors. Nicholson recommended to the King that, in order to better establish a common social order and a coordinated defense, Crown Rule should be established over all of the colonies as quickly as possible, including the conversion of the proprietary colonies to crown colonies.