From Final Fantasy - Wiki on Neoseeker

Nibelheim is a small, quiet village from the Compilation of Final Fantasy VII located just south of Mt Nibel, and is the hometown of Cloud Strife and Tifa Lockhart. There is an inn, an item shop, and several small homes. The Shinra Mansion lies just on the outskirts of the main village.

Final Fantasy VII

The town is first seen in Cloud's flashbacks depicting the incident of Sephiroth burning it down. When the party returns years later, the town is comprised of strangers and Sephiroth clones.

Inside the mansion, the party can recruit Vincent Valentine, and relive (through flashbacks) some of the events that happened there.

Mt. Nibel later appears in flashbacks of the day Tifa’s mother died. Both Tifa and Cloud fell when the bridge collapsed, landing Tifa in a coma. Cloud received much of the blame, and is the inciting event that led Cloud to leave his hometown and join SOLDIER. The Nibelheim incident is shown in flashbacks, eventually revealing that it was both Cloud and Zack that fought Sephiroth in the reactor in his attempt to take Jenova. He seriously wounded Cloud, but was defeated at his hands.

Shops

Final Fantasy VII: Crisis Core

Zack Fair, Sephiroth, Cloud, and two other infantrymen are sent to Nibelheim to investigate the Mako Reactor in the mountains. It is revealed in this game that Genesis attempted to enlist Sephiroth to his cause by referring to him as a monster. Sephiroth denies Genesis but is still distraught. He seals himself in the basement of Shinra Mansion to study the research notes left behind.

When Sephiroth finally emerges, he burns the town in rage and heads to the reactor for Jenova. Tifa follows him into the mountains in search of her father only to find him slain by Sephiroth. In an effort to get revenge, Tifa threatens Sephiroth with his own sword but is easily overcome. When Zack and Cloud arrive, they battle Sephiroth. And although he is defeated, both Zack and Cloud are seriously injured. Hojo takes the pair into the lab of the Shinra mansion to perform experiments on them for four years.

Final Fantasy VII: Dirge of Cerberus

The Shinra mansion is in ruins and serves as a battlefield for Vincent Valentine as he searches for information on Deepground. In flashbacks, the player learns of the experiments performed on him while in the basement and the full back story of Sephiroth’s birth.

See Also: Gaia (FFVII)

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Major portions of this page were written by: tifabelle