The 1966 Alabama squad finished the regular season as SEC champions with a record of 10–0. Although undefeated and playing as two-time defending national champions, Alabama did not win the national title in 1966. Instead voters rewarded Notre Dame after coach Ara Parseghian, with his team tied 10-10 with Michigan State with 1:10 to go, chose to play for the tie rather than attempt to win the game. The Fighting Irish and Spartans both finished 9–0–1 and were ranked #1 and #2 in the polls, while Alabama finished third. The appearance marked the fifth for Alabama in the Sugar Bowl, and their 20th overall bowl appearance.
The 1966 Nebraska squad finished the regular season as Big 8 Champions with a record of 9–1. The only loss of the season came in their final game against Oklahoma by a score of 10–9. In a rematch of the 1966 Orange Bowl, the appearance marked the first for Nebraska in the Sugar Bowl, and their 7th overall bowl appearance.
In a game dominated by Alabama, the Crimson Tide scored on its first three offensive possession to take a 17–0 lead. Leslie Kelley and Ken Stabler scored touchdowns on runs of one and 14 yards with Steve Davis adding a 30-yard field goal late in the quarter. A six-yard Wayne Trimble touchdown run in the second quarter gave the Crimson Tide a 24–0 lead at the half. After extended their lead to 27–0 after a 40-yard Steve Davis field goal, Nebraska scored their first points early in the fourth quarter. Dick Davis made a 15-yard touchdown reception from Bob Churchich to cut the lead to 27–7. Alabama closed the game with a 45-yard Ray Perkins touchdown reception from Ken Stabler to bring the final score to 34–7. Alabama quarterback Ken Stabler was selected as the games Most Valuable Player for completing 12 of 18 passes for 218 yards and two total touchdowns.