OBJECTIVE: To investigate aspects of nurses' work environments linked with job outcomes and assessments of quality of care in an Icelandic hospital. BACKGROUND: Prior research suggests that poor working environments in hospitals significantly hinder retention of nurses and high quality patient care. On the other hand, hospitals with high retention rates (such as Magnet hospitals) show supportive management, professional autonomy, good inter-professional relations and nurse job satisfaction, reduced nurse burnout and improved quality of patient care. METHODS: Cross-sectional survey of 695 nurses at Landspitali University Hospital, Reykjavík. Nurses' work environments were measured using the nursing work index-revised (NWI-R) and examined as predictors of job satisfaction, the Maslach burnout inventory (MBI) and nurse-assessed quality of patient care using linear and logistic regression approaches. RESULTS: An Icelandic adaptation of the NWI-R showed a five-factor structure similar to that of Lake (2002). After controlling for nurses' personal characteristics, job satisfaction, emotional exhaustion and nurse rated quality of care were found to be independently associated with perceptions of support from unit-level managers, staffing adequacy, and nurse-doctor relations. CONCLUSIONS: The NWI-R measures elements of hospital nurses' work environments that predict job outcomes and nurses' ratings of the quality of patient care in Iceland. Efforts to improve and maintain nurses' relations with nurse managers and doctors, as well as their perceptions of staffing adequacy, will likely improve nurse job satisfaction and employee retention, and may improve the quality of patient care.