There is growing awareness of the benefits of rehabilitation both in Australia and overseas. While the provision of rehabilitation services is not new, recognition of this type of health service as an integral part of health care has been linked to changes in the provision of acute care services, advances in medical technology, improvements in the management of trauma and an ageing population. Despite this, little attention has been paid to nursing's contribution to patient rehabilitation in Australia. The aim of this grounded theory study, therefore, was to collect and analyse nurses' reports of their contributions to patient rehabilitation and to describe and analyse contextual factors influencing that contribution. Data were collected during interviews with registered and enrolled nurses working in five inpatient rehabilitation units in New South Wales and during observation of the nurses' everyday practice. A total of 53 nurses participated in the study, 35 registered nurses and 18 enrolled nurses. Grounded theory, informed by the theoretical perspective of symbolic interactionism, was used to guide data analysis, the ongoing collection of data and the generation of a substantive theory. The findings revealed six major categories. One was an everyday problem labelled incongruence between nurses' and patients' understandings and expectations of rehabilitation. Another category, labelled coaching patients to self-care, described how nurses independently negotiated the everyday problem of incongruence. The remaining four categories captured conditions in the inpatient context which influenced how nurses could contribute to patient rehabilitation. Two categories, labelled segregation: divided and dividing work practices between nursing and allied health and role ambiguity, were powerful in shaping nursing's contribution as they acted individually and synergistically to constrain nursing's contribution to patient rehabilitation. The other two categories, labelled distancing to manage systemic constraints and grasping the nettle to realise nursing's potential, represent the mutually exclusive strategies nurses used in response to segregation and role ambiguity. From exploration of the relationship between the six categories, the core category and an interactive grounded theory called opting in and opting out emerged. In turn, this grounded theory reveals nursing's contribution to inpatient rehabilitation as well as contextual conditions constraining that contribution. The significance of these findings is made manifest through their contribution to the advancement of nursing knowledge and through implications for nursing practice and education, rehabilitation service delivery and research.