To explore the interplay between the perceived nursing work environment, general self-efficacy, and compassion fatigue among registered nurses in Chinese hospitals. Compassion fatigue emerges as a significant occupational stress response globally, with the nursing work environment being a pivotal influencer. There is a knowledge gap in understanding how the nursing work environment and general self-efficacy interrelate to affect compassion fatigue, particularly among Chinese nurses. Employing a cross-sectional, descriptive design, this study utilized validated questionnaires to gather data from 7085 nurses across public and private hospitals in China. The analysis focused on assessing the interrelations among the perceived nursing work environment, general self-efficacy, and different dimensions of compassion fatigue. More than half (65.67%) of the participants experienced moderate or high burnout levels, with 76.43% experiencing secondary traumatic stress. The lowest rating in the nursing work environment was for nurse/physician collaboration (10±2.07), while general self-efficacy scored higher (27.54±6.26). A positive relationship existed between the work environment and both general self-efficacy and compassion satisfaction, with a negative correlation to burnout and traumatic stress. General self-efficacy was a partial mediator in the link between work environment and compassion fatigue, suggesting that improving the work environment can decrease compassion fatigue by boosting nurses' self-efficacy. This study underscores the profound impact of the nursing work environment on compassion fatigue, mediated by general self-efficacy. It highlights the necessity of fostering a supportive work environment to enhance nurses' self-efficacy and overall well-being. Healthcare managers and institutions must create supportive work environments to reduce compassion fatigue among nurses. This includes professional development programs to enhance self-efficacy and job satisfaction. Policies should address high workloads and inadequate support. Nurse leaders should foster environments that promote psychological well-being, improving outcomes for both nurses and patients. Regular assessments and adjustments of work conditions are essential to maintain a healthy work environment.