In this paper, we initiate the study of nondiagonal finite quasi-quantum groups over finite abelian groups. We mainly study the Nichols algebras in the twisted Yetter–Drinfeld module category $$_{\mathbb {k}G}^{\mathbb {k}G}{\mathcal {Y}}{\mathcal {D}}^\Phi $$ kGkGYDΦ with $$\Phi $$ Φ a nonabelian 3-cocycle on a finite abelian group G. A complete clarification is obtained for the Nichols algebra B(V) in case V is a simple twisted Yetter–Drinfeld module of nondiagonal type. This is also applied to provide a complete classification of finite-dimensional coradically graded pointed coquasi-Hopf algebras over abelian groups of odd order and confirm partially the generation conjecture of pointed finite tensor categories due to Etingof, Gelaki, Nikshych and Ostrik.