Background: Shift work has been reported as a burden for nurses worldwide. Nurses involved in irregular shift work are more likely to suffer from insomnia and sleep disturbances. Aims: To assess the effect of shift work on perceived sleep quality among nurses at governmental hospitals and to investigate the risk factors for poor sleep quality among those nurses. Methods: A comparative cross-sectional survey study among nurses from two randomly selected governmental hospitals during the period from January 2023 to June 2023 in Dammam. Data were collected using a self-administered questionnaire incorporating demographic information, the Pittsburgh Sleep Quality Index (PSQI), and the Functional Outcomes of Sleep Questionnaire (FOSQ). Results: A total of 400 nurses participated in this study, and 293 (73.30%) were doing shift work. The global PSQI mean (±SD) score was 9.88 (±4.51), being statistically significant (p = 0.013) higher in the shift work group at 10.22 (±4.53) than the morning shift only at 8.97 (±4.38). There were statistically significant differences in PSQI for age, nationality, educational level, and use of sedative or stimulant medications. For FOSQ, the mean of the overall score was 9.58 (±3.23). The score did not differ significantly by the type of work. Conclusions: Shift work significantly lowered sleep quality, causing sleep disturbance that impairs functional outcomes for studied nurses. Understanding the interactions between shift work and sleep quality is crucial for further recommendations regarding shift work scheduling to minimize adverse effects.