: Background: The pandemic has highlighted the crucial role of nurses in health services. Nurses work at the forefront of the healthcare system, provide infection control training, and help reduce the spread of misinformation about the pandemic. Inclusive leaders create psychological safety that improves motivation and boosts job performance. Aim: To explore the effect of nurse managers’ inclusive leadership style on nurses’ psychological distress during the COVID-19 pandemic in Egyptian hospitals. Method: This was a quasi-experimental study. The study subjects consisted of two groups: managers (171) and staff nurses (1573). The study was conducted in four hospitals (one university hospital, one private hospital, one therapeutic institution, and one health insurance hospital). Three tools were used for collecting data (Inclusive Leader Questionnaire, Nurse Managers’ Knowledge about Inclusive Leadership, and Kessler Psychological Distress Scale). Results: In total, 67.25% of staff nurses perceived their nurse managers as poor inclusive leaders, and only 12.86% perceived them as good inclusive leaders. Regarding nurse managers’ knowledge about inclusive leadership, 76.023% had unsatisfactory knowledge levels before awareness sessions, and only 7.017% had a satisfactory level compared to after awareness sessions, when the majority of them had satisfactory knowledge levels. Furthermore, before awareness sessions, staff nurses experienced mild to moderate psychological distress during the COVID-19 pandemic, and only 8.2% were severe. After awareness sessions, 58.55% of them experienced mild psychological distress, and others became well (25.8%). Conclusions: Nurse managers lack knowledge about inclusive leadership before conducting awareness sessions. The majority of staff nurses perceived their nurse managers as poor inclusive leaders. Satisfactory knowledge levels among nurse managers after awareness sessions improved nurses’ psychological distress. Finally, there were strong, statistically significant positive correlations between inclusive leadership and nurses’ psychological distress.
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