The Collaborative International Dictionary of English v.0.48:

Nepotism \Nep"o*tism\ (?; 277), n. [L. nepus, nepotus, nephew:
   cf. F. n['e]potisme. See Nephew.]
   Undue attachment to relations; favoritism shown to members of
   one's family; bestowal of patronage in consideration of
   relationship, rather than of merit or of legal claim.
   [1913 Webster]

         From nepotism Alexander V. was safe; for he was without
         kindred or relatives. But there was another perhaps
         more fatal nepotism, which turned the tide of
         popularity against him -- the nepotism of his order.
                                                  --Milman.
   [1913 Webster]

WordNet (r) 3.0 (2006):

nepotism
    n 1: favoritism shown to relatives or close friends by those in
         power (as by giving them jobs)

The Devil's Dictionary (1881-1906):

NEPOTISM, n.  Appointing your grandmother to office for the good of
the party.