The 32-year-old from Whitburn is in the running for the title with her third album, Holiday Destination, released last August as a follow up to Fast Food in 2015 and her debut, Love Your Dum and Mad in 2013.
The singer-songwriter post-punk artist sings about gentrification, the refugee crisis and the failure of politicians in the north of England on Holiday Destination, which reached number 71 on the charts last year.
In a tweet telling her followers of the news, she said: "I’m still in shock and so so grateful for all of your love and support of it this far.
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Nadine told BBC Radio 6 music's Lauren Laverne she had been keeping the secret of her nomination since Friday.
She said: "It's nuts, I'm very, very excited."
She recalled the previous times they had almost been in the running for a shortlist nomination but said "it feels right with this album".
The singer said it was the "hardest I've ever worked on any piece of music or anything".
The final 12 British and Irish "albums of the year" were whittled down from a field of more than 200 entries to the award.
The winner of this year's prize will be revealed at the awards show in September.
A field of more than 200 entries has been whittled down to a shortlist of 12 British and Irish "albums of the year".
The judging panel, who will also decide on the winning album, includes BBC Radio 1 presenter Clara Amfo, singer-songwriter Marcus Mumford and broadcaster and musician Jamie Cullum.
The event's host Huw said some "brilliant" albums had made this year's shortlist with many people set to discover acts like Nadine and Sons of Kemet for the first time.
He added that it was was "interesting" there were not as many debut albums on the list.
He told the Press Association: "That's not necessarily a bad thing.
"I hope artists have time to work on their craft.
"Everything Everything are an example of a band who have released several albums and are still getting recognised for their music.
"The judges have a tough task to bringing down to 12 albums.
"Previous history doesn't really matter. It doesn't matter that Arctic Monkeys are the biggest band in the UK or that Florence has headlined Glastonbury.
"They listen to the albums on merit."
Despite championing Nadine, Huw tipped King Krule to win this year's prize.
The other final 11 are:
*Arctic Monkeys - Tranquillity Base Hotel & Casino
*Lily Allen - No Shame
*Noel Gallagher's High Flying Birds - Who Built The Moon?
*Jorja Smith - Lost And Found
*Florence + the Machine - High As Hope
*Everything Everything - A Fever Dream
*King Krule - The Ooz
*Everything Is Recorded - Everything Is Recorded
*Wolf Alice - Visions Of A Life
*Sons Of Kemet - Your Queen Is A Reptile
*Novelist - Novelist Guy.