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Aims: This study investigates the effects of ethical climate and innovative culture on the hospital nurses' job performance and innovative behaviour with the mediating factor of psychological empowerment. Background: Hospital nurses have an opportunity to embrace innovative behaviours and increase their performance through a positive ethical climate and innovative culture. Understanding nurses' psychological empowerment in the workspace context that impacts innovation has not been a focus for hospital leadership. Methods: A cross‐sectional study based on a questionnaire design was used for data collection and analysis. The data are collected through a voluntary survey—selected by a convenience sampling method—of 393 nurses from University Hospital. The Structural Equation Model and Bootstrap method test the study's hypotheses. A STROBE checklist was used for reporting. Results: Ethical climate and innovative culture predict job performance and innovative behaviour with the mediating role of psychological empowerment. Moreover, psychological empowerment decreases the predictive power of ethical climate and innovative culture separately but increases the nurses' job performance and innovative culture. Conclusions: Ethical climate and innovative culture significantly positively affect job performance and innovative behaviour. Additionally, the mediating effect of psychological empowerment increases job performance and innovative behaviour more than the effects of ethical climate and innovative culture. Implications for Nursing Management: Nurses need to be prepared to practice safely, accurately and compassionately by translating moral values into rules of the nursing profession, where innovation increases at an astonishing rate. Nurse leaders and hospital managers should establish ethical norms as the consensus of ultimate criteria of validity of the rational analysis of tasks or particular nursing practice concepts, with an innovative culture by empowering nurses exceedingly in their workplace. [ABSTRACT FROM AUTHOR]