While studies on the stress sensitivity of relative permeability using conventional fluids have varying and inconclusive results, the effect of stress on relative permeability using nanofluids has not been reported. In this study, the effect of net effective stress on relative permeability and two-phase flow parameters using conventional and nanofluid was investigated. Nanoparticle retention in pores was examined by changes in nuclear magnetic resonance transverse relaxation time distribution. Nanoparticle deposition affected big pores more than small pores. As net effective stress was increased during water flooding, end-point oil and water saturations increased and end-point oil relative permeability decreased. Nanofluid–oil relative permeability showed contrasting results depending on whether the sample had adsorbed nanoparticles prior to relative permeability measurements. For the sample that had adsorbed nanoparticles prior to subsequent stress increments, the effect of stress was dominated by the effect of nanoparticle adsorption. However, the effect of stress took precedence over nanoparticle adsorption in samples that had no nanoparticle deposition prior to relative permeability experiments. A comparison of water–oil and nanofluid–oil relative permeabilities showed similar initial water saturations and end-point oil relative permeability changes but differing residual oil saturations and end-point water relative permeability. Mobility ratio increased in water flooding as stress increased but decreased after an initial increase in nanofluid flooding. Displacement efficiency decreased with increased stress for both water and nanofluid flooding. The results provide insights into the effect of stress on relative permeability using conventional fluids and silica nanofluid.