Mental health remains under prioritised in resource-constrained setting of Odisha, where shortages of mental health professionals limit access to care. This study assessed community mental health services expected from nurses and explored challenges encountered during service delivery. A mixed-method design was used among 200 nursing professionals, including Nursing Officers and Community Health Officers, from four districts of East Odisha. Quantitative data assessed mental health knowledge and practice, while qualitative data explored challenges in service delivery. Participants demonstrated moderate mental health knowledge but reported difficulties translating knowledge into practice. Major challenges included treatment non-adherence, stigma, inadequate family support, and limited resources. Participants with mental health training demonstrated better practice scores. Regular training, adequate staffing, and community awareness were identified as strategies to strengthen service delivery. A considerable knowledge–practice gap exists in community mental health care. Continuous training, adequate workforce support, and community-based awareness initiatives are needed to improve the quality and effectiveness of mental health services.