Nicholson, along with all sitting Unionist MPs, resigned their Westminster seats in December 1985, to highlight their opposition to the Anglo-Irish Agreement and to use the resultant by-elections to campaign on the issue.
The poll was held on 23 January 1986, and was unusual for a by-election in the turnout being higher than for the preceding general election, however Nicholson was not re-elected, (despite gaining an increase in his own vote) losing his seat to the nationalistSDLP candidate Seamus Mallon. Nicholson also failed to recapture the seat at the following general election.