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Nicholls, 19, who had a temporary stint at Town's League Two rivals Accrington last season, will remain at Sixfields until the end of October.
"We needed a keeper who has talent and Football League experience," said boss Aidy Boothroyd.
"He is a good keeper, he did well at this level last season and he knows a bit about League Two.
"He has come here to get games under his belt. We are in a fortunate position as we already have an experienced, quality goalkeeper on our books and he is well on the way to recovery after a nasty injury.
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"In addition, in Dean Snedker we have a young goalkeeper of massive potential also on our books and that is fantastic for us. I am sure Lee will come in and do a good job for us."
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