c. 1300, nacioun, "a race of people, large group of people with common ancestry and language," from Old French nacion "birth, rank; descendants, relatives; country, homeland" (12c.) and directly from Latin nationem (nominative natio) "birth, origin; breed, stock, kind, species; race of people, tribe," literally "that which has been born," from natus, past participle of nasci "be born" (Old Latin gnasci), from PIE root *gene- "give birth, beget," with derivatives referring to procreation and familial and tribal groups.
The word is used in English in a broad sense, "a race of people an aggregation of persons of the same ethnic family and speaking the same language," and also in a narrower sense, "a political society composed of a government and subjects or citizens and constituting a political unit; an organized community inhabiting a defined territory within which its sovereignty is exercised."
In Middle English it is not easy to distinguish them, but the "political society" sense seems to have emerged by late 14c. and it has gradually predominated. The older sense is preserved in the application of nation to the native North American peoples (1640s). Nation-building first attested 1907 (implied in nation-builder).