"It's an amazing, wonderful paradox, isn't it?" said Pawlikowski, 57, who watched the nominations on a coffee shop television while on vacation in Mexico.
Spurning bigger movie offers to stay on the fringes and using a small budget how he pleased gave him the greatest creative freedom, he said.
[ Read review: Ida ]
"Everyone said it would be professional suicide," said the director whose films My Summer of Love (2004) and Last Resort (2000) each won a BAFTA award. "It turned out to be the opposite."
An Oscar nomination is a big deal - and big business - for any movie. But the global exposure it lends to foreign films like Ida is a special treat for often small budget productions far out of Hollywood's orbit.
"I am overflowing with joy today," said the Argentine director Damian Szifron, whose black comedy Wild Tales also picked up a nomination. "I feel like Gene Kelly in Singin' in the Rain."
That reaction is a common one in the best foreign language film category, where under-the-radar gems are often discovered.
"It's great for our country," said Pawlikowski. "It's great for our cinema."
In this year's foreign language Oscar race, Ida, the story of an 18-year-old novitiate nun in 1960s Poland who learns she is a Jewish orphan, is up against the Russian tragedy Leviathan, and war dramas Tangerines from Estonia and Timbuktu from Mauritania.
Leviathan, directed by Andrey Zvyagintsev, has already bested Ida and Tangerines for the foreign picture Golden Globe handed out last Sunday.
But for Pawlikowski, there may be even more to savor from these Oscars. Also earning nominations were his cinematographers, Lukasz Zal and Ryszard Lenczewski, the only crossovers to another category among the foreign films.
"It's a bit of a fairytale, which happens just once in a lifetime," he said.
(Editing by Mary Milliken and Gunna Dickson)