Custom providers in NestJS let you define how dependencies are created and injected. First, you define a unique token to identify the provider. Then, you create a provider object specifying the token and how to create the value, using useClass for classes, useValue for fixed objects, or useFactory for functions. You register this provider in the module's providers array. When you want to use it, you inject it in a constructor using the @Inject decorator with the same token. This process allows you to customize dependency injection beyond just classes. The execution steps show defining the token, creating the provider, registering it, injecting it, and finally using the injected instance. Key points include matching tokens exactly and choosing the right provider type. This method helps you control what gets injected and how, making your code flexible and testable.