The son of a goldsmith, Steno was educated in his native city of Copenhagen before beginning his travels and studies abroad in 1660. While studying anatomy in Amsterdam he discovered the parotid salivary duct, also called Stensen's duct after the Danish form of his name. Other important anatomical findings included his realization that muscles are composed of fibrils and his demonstration that the pineal gland exists in animals other than man. (René Descartes had considered the pineal gland the location of the soul, believing that both were found only in man.)

Steno obtained his medical degree from Leiden in 1664 and the following year went to Florence, where he became physician to the grand duke Ferdinand II. In the field of geology he made important contributions to the study of crystals and fossils. His observations on quartz crystals showed that, though the crystals differ greatly in physical appearance, they all have the same angles between corresponding faces. This led to the formulation of Steno's law, which states that the angles between two corresponding faces on the crystals of any chemical or mineral species are constant and characteristic of the species. It is now known that this is a consequence of the internal regular ordered arrangement of the atoms or molecules.

Steno's geological and mineralogical views were expressed in his De solido intra solidum naturaliter contento dissertationis prodromus (1669; An Introductory Discourse on a Solid Body Contained Naturally Within a Solid). The curious title refers to the solid bodies we refer to as fossils found in other solid bodies. Steno was particularly concerned with the common Mediterranean fossils known at the time as ‘glossipetrae’ (tongue stones), thought by some to have fallen from the sky and by others to have grown in the earth like plants. They were triangular, flat, hard, and with discernible crenellations along two sides.

In 1666 Steno was presented with the head of a giant shark. He was immediately struck by the close similarity between the glossipetrae and sharks' teeth. In attempting to understand this correlation Steno formulated two important principles to explain how solids form in solids. By the first, an ordering rule, it proved possible to tell which solidified first by noting which solid was impressed on the other. As glossipetrae left their imprint in the surrounding rocks they must have been formed first. Therefore it made no sense to suppose that they grew in the strata.

Steno's second rule proclaimed that if two solids were similar in all observed respects then they were likely to have been produced in the same way. It followed that the similarity between the glossipetrae and sharks' teeth revealed them as fossilized teeth, a revolutionary claim at the time. But Steno's rules offered more than an explanation of glossipetrae; they in fact offered a novel way of interpreting the fossil record, one which would be followed increasingly by later geologists.

Steno was brought up a Lutheran but converted to Catholicism in 1667, taking holy orders in 1675. In 1677 he was appointed Titular Bishop of Titopolis (in Turkey), catering for the spiritual needs of the few Catholics surviving in Scandinavia and Northern Germany.