Given that $N$ is nilpotent, then $N$ is similar to $N^2$ if and only if $N=0$ ($N$ is the zero matrix). The "$\Longleftarrow$" direction is easy enough, because $N = 0 = N^2$ so they're equal and trivially similar.
But showing $N \text{ nilpotent and } N \sim N^2\Longrightarrow N=0$ is turning out to be more difficult. I'm comfortable using well-known facts about $n \times n$ nilpotent matrices such as:
\begin{align} N \text{ nilpotent } &\Longleftrightarrow \text {all eigenvalues }=0\\ &\Longleftrightarrow p_N = \lambda^n\\ &\Longleftrightarrow m_N =\lambda^k\,,\, \text{ for some k, }1\leq k \leq n\\ &\Longleftrightarrow {\rm tr}N^q = 0\,,\, \text{ where }q\in \mathbb{N}\text{, minimal, s.t. } N^q=0 \end{align}
Note that $p_N$ above is the characteristic and $m_N$ is the minimal polynomial. My hunch is to use that trace equals 0 for some power $q$ and the fact that each entry $c_{ij}$ of $N^2$ is \begin{align} c_{ij} = \sum_{k=1}^n n_{ik} n_{kj} \end{align} to get some cancellations but I can't quite see it yet. Any thoughts?
Without even getting into minimal polynomials, this can be seen directly from the definitions of matrix similarity and nilpotency. Let $k > 0$ be the smallest positive integer such that $N^k = 0$, and suppose that $N\sim N^2$. Then there exists an invertible matrix $M$ such that $$MN^2M^{-1} = N$$ If $k$ is even, raising both sides to the power of $k/2$ establishes $N^{k/2} = 0$ which contradicts the minimality of $k$ so $N$ must be zero. Try figuring out the details for $k$ odd.