<?xml version="1.0"?>
<ownershipDocument>

    <schemaVersion>X0202</schemaVersion>

    <documentType>4</documentType>

    <periodOfReport>2005-01-31</periodOfReport>

    <notSubjectToSection16>0</notSubjectToSection16>

    <issuer>
        <issuerCik>0000073088</issuerCik>
        <issuerName>NORTHWESTERN CORP</issuerName>
        <issuerTradingSymbol>NWEC</issuerTradingSymbol>
    </issuer>

    <reportingOwner>
        <reportingOwnerId>
            <rptOwnerCik>0001271670</rptOwnerCik>
            <rptOwnerName>BIRD BRIAN B</rptOwnerName>
        </reportingOwnerId>
        <reportingOwnerAddress>
            <rptOwnerStreet1>125 S. DAKOTA AVENUE</rptOwnerStreet1>
            <rptOwnerStreet2></rptOwnerStreet2>
            <rptOwnerCity>SIOUX FALLS</rptOwnerCity>
            <rptOwnerState>SD</rptOwnerState>
            <rptOwnerZipCode>57104</rptOwnerZipCode>
            <rptOwnerStateDescription></rptOwnerStateDescription>
        </reportingOwnerAddress>
        <reportingOwnerRelationship>
            <isDirector>0</isDirector>
            <isOfficer>1</isOfficer>
            <isTenPercentOwner>0</isTenPercentOwner>
            <isOther>0</isOther>
            <officerTitle>Chief Financial Officer</officerTitle>
            <otherText></otherText>
        </reportingOwnerRelationship>
    </reportingOwner>

    <nonDerivativeTable>
        <nonDerivativeTransaction>
            <securityTitle>
                <value>COMMON</value>
                <footnoteId id="F1"/>
            </securityTitle>
            <transactionDate>
                <value>2005-01-31</value>
            </transactionDate>
            <transactionCoding>
                <transactionFormType>4</transactionFormType>
                <transactionCode>A</transactionCode>
                <equitySwapInvolved>0</equitySwapInvolved>
            </transactionCoding>
            <transactionAmounts>
                <transactionShares>
                    <value>21440</value>
                </transactionShares>
                <transactionPricePerShare>
                    <footnoteId id="F1"/>
                </transactionPricePerShare>
                <transactionAcquiredDisposedCode>
                    <value>A</value>
                </transactionAcquiredDisposedCode>
            </transactionAmounts>
            <postTransactionAmounts>
                <sharesOwnedFollowingTransaction>
                    <value>21440</value>
                </sharesOwnedFollowingTransaction>
            </postTransactionAmounts>
            <ownershipNature>
                <directOrIndirectOwnership>
                    <value>D</value>
                </directOrIndirectOwnership>
            </ownershipNature>
        </nonDerivativeTransaction>
    </nonDerivativeTable>

    <derivativeTable></derivativeTable>

    <footnotes>
        <footnote id="F1">RESTRICTED STOCK AWARD OF COMMON STOCK, PAR VALUE $.01 PER SHARE, UNDER THE NORTHWESTERN CORPORATION 2004 SPECIAL RECOGNITION GRANT RESTRICTED STOCK PLAN, FOR WHICH A REGISTRATION STATEMENT ON FORM S-8 WAS FILED JANUARY 31, 2005.  THE SHARES VEST: 50% AS OF THE COMPANY'S EMERGENCE FROM CHAPTER 11 REORGANIZATION ON NOVEMBER 1, 2004; 10% AS OF NOVEMBER 1, 2005; 20% AS OF NOVEMBER 1, 2006; AND 20% AS OF NOVEMBER 1, 2007.</footnote>
    </footnotes>

    <ownerSignature>
        <signatureName>Brian B. Bird</signatureName>
        <signatureDate>2005-02-01</signatureDate>
    </ownerSignature>
</ownershipDocument>

