Implementing nonlinear optical components in nanoscale photonic devices is challenged by phase-matching conditions requiring thicknesses in the order of hundreds of wavelengths, and is disadvantaged by the short optical interaction depth of nanometre-scale materials and weak photon–photon interactions. Here we report that ferroelectric NbOI2 nanosheets exhibit giant second-harmonic generation with conversion efficiencies that are orders of magnitude higher than commonly reported nonlinear crystals. The nonlinear response scales with layer thickness and is strain- and electrical-tunable; a record >0.2% absolute SHG conversion efficiency and an effective nonlinear susceptibility χ(2)eff in the order of 10−9 m V−1 are demonstrated at an average pump intensity of 8 kW cm–2. Due to the interplay between anisotropic polarization and excitonic resonance in NbOI2, the spatial profile of the polarized SHG response can be tuned by the excitation wavelength. Our results represent a new paradigm for ultrathin, efficient nonlinear optical components.