Australia, like most countries in the world, is facing a crisis regarding the recruitment and retention of nurses. This situation is particularly notable for psychiatric nursing, a specialty not generally popular among undergraduate nursing students. To date, the nursing literature has tended to identify the problem, with less attention to the exploration of possible solutions. The aim of this article is to explore the literature concerning residency programs for nursing students. Although limited, the literature suggests potential benefits to this program, including improvements in competency and confidence, resulting in reduced need for lengthy orientation for new graduates and overall improvements in recruitment and retention rates for psychiatric nurses. In conclusion, residency programs for undergraduate nursing students could provide a useful strategy to improve the image of psychiatric nursing and attract new graduates. Further research is required to assess the applicability of this model in Australia.