Aim. The aim of this study was to investigate how differences in life events and stress contribute to psychological distress in nurses and nursing students. Background. Stress is an issue for nursing students and qualified nurses leading to psychological distress and attrition. Design. A longitudinal study using four time waves was conducted between 1994-1997. Methods. Measures were taken of stress, life events and psychological distress in addition to a range of demographic data. Data were analysed using descriptive statistics, linear modelling and mixed-effects modelling. The study was set in Scotland, UK and used newly qualified nurses and nursing students from four university departments of nursing over four years. The study was initiated with 359 participants (147 nurses and 212 nursing students) and complete data were obtained for 192 participants. Results. Stress levels, psychological distress and life events are all associated within time and across time. At baseline, life events and stress contributed significantly to psychological distress. The pattern of psychological distress differed between the nursing students and the newly qualified nurses with a high level in the nurses after qualifying and starting their career. Conclusion. Stress, individual traits, adverse life events and psychological distress are all interrelated. Future lines of enquiry should focus on the transition between being a nursing student and becoming a nurse. Relevance to clinical practice. Stress and psychological distress may have negative outcomes for the retention of nursing students in programmes of study and newly qualified nurses in the nursing workforce. © 2008 Blackwell Publishing Ltd.