On 2 August 2008, Nicholls signed a three-year contract with former club Luton Town, stating that he will always support Luton and loves the club. He returned as club captain, taking over from Keith Keane. Nicholls missed much of the 2008–09 season as a result of recurring injury problems, but returned fully fit in the final run-in of games. On 24 March 2009, he was given a five-game ban and £1,000 fine for supposedly applauding Luton fans for throwing missiles at the referee after a controversial 3–3 draw with Bradford City.