This study examined the impact of simulation-based education on the perceived clinical competence of undergraduate nursing students in psychiatric-mental health nursing. A cross-sectional, descriptive, and comparative design was used with 32 junior and senior nursing students at a southeastern U.S. university. Participants completed the Clinical Competence Questionnaire (CCQ), the Simulation Effectiveness Tool–Modified (SET-M), and a demographic survey. The results showed that students with mental health simulation experience had significantly higher overall clinical competence scores compared to those without such experience (p = .004). This was particularly evident in the areas of professional behaviors, general performance, and core nursing skills. Simulation effectiveness scores were high (M = 50, SD = 0.47), with debriefing sessions rated most positively. Qualitative feedback underscored the significance of simulation in familiarizing students with uncommon clinical situations and improving their readiness; however, a few participants indicated a disinterest in psychiatric nursing. The results back up the use of high-fidelity simulation in mental health education as a way to improve confidence, strengthen critical clinical competencies, and close the knowledge gap between theory and practice. Limitations of the study include a small sample size, a single-site setting, and reliance on self-reported data. Further multi-site research is recommended to investigate factors influencing simulation outcomes.