The 27-year-old actor was stopped by police about 2:40 a.m. after being spotted driving a silver Mercury Mountaineer the wrong way down a one-way street in the city, said Jackson police Lt. John Holda.
An officer smelled alcohol and, after conducting sobriety tests, took Nichols into custody. A breath test later indicated he had a blood-alcohol content of 0.10 percent, Holda said.
The legal limit for drivers in Michigan is 0.08 percent.
Nichols, who also appeared in "Deadwood," was held at the Jackson County Jail and released about 8:40 a.m., said Jackson County sheriff's Lt. Carl Carmoney. He wasn't arraigned and was expected to appear in court at a later date.
If convicted of drunken driving, Nichols could face up to 93 days in jail, a $500 fine and community service.
The Jackson Citizen Patriot, which reported the arrest Friday, said Nichols has been living at nearby Clark Lake this summer. Jackson is located about 65 miles west of Detroit. Efforts to reach Nichols' agent were unsuccessful.
HBO said earlier this month that "John From Cincinnati," a surfer drama co-created by "Deadwood" executive producer David Milch, will not return for a second season.