Aim and objective: This paper examined the impact of leadership characteristics of nursing unit managers, as perceived by staff nurses, on staff satisfaction and retention. Background. A positive work environment will increase levels of job satisfaction and staff retention. Nurse leaders play a critical role in creating a positive work environment. Important leadership characteristics of the front-line nurse manager include visibility, accessibility, consultation, recognition and support. Design: Secondary analysis of data collected on 94 randomly selected wards in 21 public hospitals across two Australian states between 2004-2006. Methods: All nurses (n = 2488, 80·3% response rate) on the selected wards were asked to complete a survey that included the 49-item Nursing Work Index-Revised [NWI-R] together with measures of job satisfaction, satisfaction with nursing and intention to leave. Subscales of the NWI-R were calculated. Leadership, the domain of interest, consisted of 12 items. Wards were divided into those reporting either positive or negative leadership. Data were analysed at the nurse level using spss version 16. Results: A nursing manager who was perceived to be a good leader, was visible, consulted with staff, provided praise and recognition and where flexible work schedules were available was found to distinguish the positive and negative wards. However, for a ward to be rated as positive overall, nurse leaders need to perform well on all the leadership items. Conclusion: An effective nursing unit manager who consults with staff and provides positive feedback and who is rated highly on a broad range of leadership items is instrumental in increasing job satisfaction and satisfaction with nursing. Relevance to clinical practice: Good nurse managers play an important role in staff retention and satisfaction. Improved retention will lead to savings for the organisation, which may be allocated to activities such as training and mentorship to assist nurse leaders in developing these critical leadership skills. Strategies also need to be put in place to ensure that nurse leaders receive adequate organisational support from nursing executives.