Introduction Nurses play a vital role in ensuring effective patient care delivery and organizational productivity. Hence, it becomes imperative to prioritize their psychological well-being and explore how its impairment may be associated with their productivity loss. Aims The study aims to investigate the relationship between nurses’ psychological well-being and their work productivity loss by examining how nurses self-reported their own psychological well-being and work productivity loss. Methods A descriptive correlational design was conducted at an Egyptian university hospital. A convenience sample of 400 nurses completed two tools: (a) Outcome Questionnaire-45 was used to assess the psychological well-being of nurses and (b) the Work Productivity and Activity Impairment – General Health Questionnaire was used to measure nurses’ work productivity. Results Among the 400 surveyed nurses, 66.7% reported overall poor psychological well-being. Regarding work productivity loss, 22.8% of nurses missed an average of 974.81 work hours due to absenteeism, and 62.0% lost an average of 10,630 work hours due to presenteeism. Additionally, 75.5% experienced impaired daily living activities. Approximately 13.4% of total working hours were missed due to health problems or psychological distress. Regression analysis revealed that poor psychological well-being significantly predicts work productivity loss, accounting for 2.0% of absenteeism, 11.0% of presenteeism, 17.0% of daily activity impairment, and 9.0% of overall productivity loss, with the model being significant ( p < 0.01). Conclusion Nurses often experience poor psychological well-being and distress that hinder their daily activities and cause work productivity loss. Therefore, hospital management should prioritize improving nurses’ physical and mental health and bolstering their self-efficacy and resilience to minimize the effects of symptom distress on productivity. Investing in nurses’ well-being through managerial caring, organizational support, and fostering a supportive work environment are vital strategies for promoting quality patient care and enhancing their work productivity.