One of the important and integral parts of teaching in any field is evaluation. It comprises of many different forms of assessment. To assess the clinical competence; Objective Structured Clinical Examination (OSCE) was introduced in the health professional education. In nursing, OSCE is a structured assessment of specific, clearly defined clinical skills, in which students complete a sequence of practical examinations designed to assess separate components of a consultation. OSCE is the part of an effective assessment strategy of nursing competencies which requires the use of advance clinical practical skills, such as history taking and physical examination. There are number of advantages such as it is used as a tool for the assessment of clinical skills and also plays an integral role in the summative and formative components of assessment which includes evaluation of performance and feedback. It also depicts students’ specific behavior in a simulated environment, where strict control over the clinical context could be possible for students learning. This review will highlight the advantages and appropriate use of OSCE for assessing clinical competence in nursing education and it will provide a brief overview of the challenges pertaining to this mode of assessment in nursing curriculum.