BACKGROUND: Psychiatric nurses experience unique emotional and ethical challenges, including moral distress, associative stigma, and compassion fatigue, that can negatively affect their mental health and clinical performance. The complex relationship among these variables has not been clearly defined. Thus, this study aimed to determine the levels of compassion fatigue, associative stigma, and moral distress and to investigate how these factors interact with an emphasis on the role of compassion fatigue in mediating the relationship between associative stigma and moral distress. METHODS: A convenient sampling technique was used to recruit nurses from Erada Mental Health Complex in Riyadh. In addition to sociodemographic data, three validated tools were used to collect data: the Compassion Fatigue Scale, Clinician Associative Stigma Scale, and Moral Distress for Healthcare Professionals Scale. The structural equation modeling was used to examine the relationship among the three variables using the 'lavaan' package. RESULTS: Mediation analysis revealed that compassion fatigue significantly mediates the relationship between associative stigma and moral distress, with 80% of the total effect mediated (β = 6.38, p <
0.001). Direct and indirect effects were confirmed, with associative stigma impacting moral distress both directly (β = 1.64, p <
0.001) and through compassion fatigue (84% of the effect). Structural equation modeling showed a satisfactory model fit (χ²/df = 2.84, CFI = 0.90, RMSEA = 0.075) and supported the central role of compassion fatigue in this relationship. CONCLUSIONS: Our findings underscore the importance of addressing compassion fatigue and associative stigma to alleviate moral distress among psychiatric nurses. To ensure nurses' well-being and the delivery of high-quality mental health care, interventions such as peer support groups, resilience training, and organizational initiatives to decrease stigma and compassion fatigue should be considered for all nurses working in psychiatric mental health settings. CLINICAL TRIAL NUMBER: Not applicable.