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Nursing students, during their study, experience significant changes on their journey to become nurses. A major change that they experience is the development of their moral competency.The purpose of this study is to explore the process of moral development in Iranian nursing students.A constructivist grounded theory method was adopted. Twenty-five in-depth, semi-structured, face-to-face intensive interviews with 22 participants were conducted from September 2013 to October 2014. All interviews were audio-taped, transcribed, and analyzed using writing memos and the constant comparative method.The setting was three major nursing schools within Tehran, the capital of Iran. Nineteen nursing students and three lecturers participated in the study.The study was approved by the Tehran University of Medical Sciences Committee for Medical Research Ethics (92/D/130/1781). It was explained to all participants that their responses would be treated with confidentiality and that they would not be identified in any way in the research and any publication ensuing from the research. All participants agreed to be interviewed and signed written consent forms agreeing to the recording and analyses of the interview data gathered.Findings indicated three levels of moral development along with the formation of professional identity. The three levels of moral development, getting to know the identity of nursing (moral transition), accepting nursing identity (moral reconstruction), and professional identity internalization (professional morality), were connected to the levels of professional identity formation.The proposed model added a new insight to professionalism in nursing.From the findings, it was concluded that to enhance higher moral practice, nursing instructors should promote the professional identity of nursing students. Reinforcement of moral characteristics and professional identity within registered nurses occurs over a series of phases and, once fully integrated into the identity of nursing students, the moral characteristics that they acquire become part of their both professional and personal identities.