To assess the rapidly changing psychological status of nurses during the acute phase of the 2003 SARS outbreak, we conducted a prospective and periodic evaluation of psychiatric morbidity and psychological adaptation among nurses in SARS units and non-SARS units. Nurse participants were from two SARS units (regular SARS [ N = 44] and SARS ICU [ N = 26]) and two non-SARS units (Neurology [ N = 15] and CCU [ N = 17]). Participants periodically self-evaluated their depression, anxiety, post-traumatic stress symptoms, sleep disturbance, attitude towards SARS and family support. Results showed that depression (38.5% vs. 3.1%) and insomnia (37% vs. 9.7%) were, respectively, greater in the SARS unit nurses than the non-SARS unit nurses. No difference between these two groups was found in the prevalence of post-traumatic stress symptoms (33% vs. 18.7%), yet, three unit subjects (SARS ICU, SARS regular and Neurology) had significantly higher rate than those in CCU (29.7% vs. 11.8%, respectively) ( p < 0.05). For the SARS unit nurses, significant reduction in mood ratings, insomnia rate and perceived negative feelings as well as increasing knowledge and understanding of SARS at the end of the study (all p < 0.001) indicated that a gradual psychological adaptation had occurred. The adjustment of nurses in the more structured SARS ICU environment, where nurses care for even more severely ill patients, may have been as good or better than that of nurses in the regular SARS unit. Occurrence of psychiatric symptoms was linked to direct exposure to SARS patient care, previous mood disorder history, younger age and perceived negative feelings. Positive coping attitude and strong social and family support may have protected against acute stress. In conclusion, the psychological impact on the caring staffs facing future bio-disaster will be minimized with lowered risk factors and a safer and more structured work environment.