Aim: The study was designed to elucidate the relationships between cultural values, contact level, differential nursing practices and stigma towards mental illness among General and Psychiatric Nurses (N = 208) from Anglo and Chinese backgrounds in Australia. The study results aimed at informing education disciplines, health care providers and policy makers to examine strategies that seek to diminish stigma of mental illness and to reflect on cultural sensitive issues associated with mental illness. This paper reports analyses conducted with AMOS-5 within the Chinese sample (n = 84). Method: A cross-sectional survey explored a number of factors such as contact factor, cultural values (Individualism (IND), In group Role Concern (IRC) and In group Interdependence (INT)), “General Stigma” measured by the Social Distancing (STPP) and Negative Stereotyped (DISL) Scales and how these factors might translate into nurses’ endorsement of differential care practices between two vignettes (diabetes versus mental illness), which was termed “Practice Stigma”. “Practice Stigma” was measured by Caring Approach (CARE), Nursing Satisfaction (SATI), Authoritarian Stance (AUTH) and Negativity (NEGA) Scales. Differential practices (DIF_CARE, DIF_SATI, DIF_AUTH and DIF_NEGA) were obtained by subtracting the diabetes case from the mental illness case. Findings: Chinese nurses endorsed more highly collectivist values measured by the variables “In group Interdependence” and “In group Role Concern” when compared with Anglo-Australian nurses, but there was no difference in individualist values measured by “Individualism”. Chinese nurses endorsed more highly general stigma towards mental illness than Anglo nurses when statistically controlled for differences in background demographics and contact factors. Chinese nurses endorsed more care/support and authoritarianism in their clinical approaches than Anglo-Australian nurses, although there was no significant interaction effect between ethnicity and patient type on care and authoritarianism. Chinese nurses endorsed more highly differential negativity than Anglo nurses for the mental illness case than the diabetes case, an effect mediated by differences in general stigma between these two ethnic groups. Within the Chinese sample, higher contact was related to lower differential negativity for the mental illness case than the diabetes case. Several path analyses suggested that Chinese values influenced differential negativity, mediated by general stigma and prior diversified contact with people having a mental illness.