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 $_{k G}^{k G}mathcal{YD}^Phi$ with $Phi$ 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.
