Abstract The aim of the present study was to identify the relationship between nursing students' level of anxiety and their performance in psychiatric setup. This is a descriptive study conducted at psychiatric mental health nursing department at Faculty of nursing, Benha University and mental health hospital of ministry of health as a clinical area. The data was collected from October 2004 to December 2004, the sample was 197 nursing students. There were four tools used for collecting data: an interview questionnaire comprised socio-demographic characteristics of students, questions to assess the student knowledge of psychiatric mental health course, patient's needs, activity and behavior of patients, communication of patients with health team member and patient environment. The second tool was state-Trait Anxiety Inventory ( a self-evaluation questionnaire to assess level of students' anxiety). The third tool, an observation checklist to observe the students' behavior during clinical training and the fourth tool: psychiatric nursing student clinical evaluation sheet to evaluate students' performance in clinical area. The results of the study revealed that the majority of students had adequate knowledge about psychiatric patients and mental illness after course experience. There was significant difference between students' level of anxiety at first week and last week of clinical training and negative correlation between students' anxiety and students' performance. Also , there was a negative correlation between students' anxiety and students knowledge. In addition, the majority of students' performances were very good. The study recommended that Clinical instructors should make pre and post clinical conferences. This will help to decrease students' anxiety.