Lucy Osburn entered the Nightingale School of Nursing at St Thomas's Hospital, London in September 1866 as a Lady Probationer. She was contracted to the Nightingale Fund (raised from subscriptions during the Crimean War) to work for it for three years after her training. Lady Probationers trained to become, not bedside nurses, but nursing managers. Shortly after Osburn began her training, Florence Nightingale received a request from Henry Parkes on behalf of the New South Wales Government. Parkes's request was for a team of nurses to be sent to the colony to introduce Florence Nightingale's style of nursing at the Sydney Infirmary and Dispensary and also to train nurses in Nightingale's methods for hospitals throughout the colony. The request, backed by a detailed memorandum from the influential surgeon Alfred Roberts, impressed Nightingale. Lucy Osburn was one of the few Lady Probationers training and was willing, for health reasons, to migrate to Sydney. Despite missing some three months of her year's training due to illness, she was selected to head the team of nurses to go to Sydney. She finished her training in September 1867, observed midwifery and visited other hospitals before leaving with the five other nurses on 2 December 1867. They were all employed by the New South Wales Government on three year contracts with generous terms of employment.

Lucy Osburn arrived in Sydney on 5 March 1868 and a week later was supervising the nursing of Prince Alfred, Duke of Edinburgh and Queen Victoria's second son, who had been shot in an attempted assassination. She soon set about establishing the fundamentals of Nightingale nursing at the Infirmary. She progressively dismissed the male nurses (wardsmen) and replaced them with female nurses. She introduced training on and off the wards for the nurses. She introduced a hierarchical system of management whereby she was in supreme control of nursing and the nurses. Strict obedience to nursing superiors and medical orders was enforced. Lucy Osburn also introduced the two-tiered system of training she had experienced at St Thomas's: Nurses from the working class entered as ordinary probationers and were expected to remain nurses for the rest of their careers. Sister Probationers were middle class women who trained to become Sisters (ward managers) and could aim to become Lady Superintendents or Matrons.

Lucy Osburn's main problems in her first years were the decrepit building which housed the main wards and that her responsibility and powers were poorly defined. She could do little without the cooperation of the Superintendent who controlled the male staff, or the House Committee who could authorise effective cleaning. She was soon blamed for the dirty, vermin-infested wards under her control but had insufficient power to effectively clean the wards.

Soon after her arrival, Lucy Osburn temporarily rejected the title of Lady Superintendent for one with religious connotations, Lady Superior. It was one of a number of acts which aroused the hostility of the powerful Evangelical faction who became convinced she was trying to set up a quasi-Catholic "nunnery" at the hospital. Accused of ordering the burning of bibles, she was vindicated by a Commission of Inquiry in 1870 but Evangelical hostility remained. With the strong support of Henry Parkes and other influential friends, Lucy Osburn survived numerous other public inquiries, most notably the First Report into the Infirmary by the 1873 Royal Commission into Public Charities. After this Report, her powers were clarified. The role of the hospital as a place of acute care was confirmed with its change of name to Sydney Hospital in 1881.

Lucy Osburn's nursing register, where details of nursing students were recorded, indicates her avoidance of direct praise of her staff. Nevertheless, she was a highly practical manager who insisted on good living conditions for the nurses. Her concern for patients is less obvious in her writings but underlay her actions. Her inexperience, sense of social superiority and insensitivity meant that she failed to exercise effective authority over the Head Nurses (Sisters) who had accompanied her from Britain. They were soon quarrelling and placed Nightingale nursing in disrepute. One became pregnant and had to leave; only one of the other four stayed loyal. At the end of her three year contract, Lucy Osburn agreed to stay on only if the other three Sisters' contracts were not renewed. The hospital and government acceded to her wish, much to the anger of Florence Nightingale and her supporters.

Lucy Osburn's achievement was to reform nursing practice and to train colonial nurses to spread the ideal of trained, disciplined nursing throughout the Australian colonies. These achievements were marred by continual criticism of her autocratic style of management. Finally in 1884, during one of her many bouts of illness and facing a public call for her resignation, she resigned. She travelled extensively then finally settled back in London. In 1886-87 she retrained with the Metropolitan and National Nursing Association, which nursed the poor in their own homes. She was then appointed Superintendent of the Newington and Walworth District among the slums of London's East End. She was partly reconciled with Florence Nightingale but joined the (later Royal) British Nursing Association which became embroiled in the bitter 'battle of the nurses', advocating state registration of nurses against Florence Nightingale's wishes.

Early in 1891 Lucy Osburn resigned, too ill to work. She went to stay with her sister Annie Osburn who headed a successful girls school in Harrogate, Yorkshire. There, just before Christmas 1891, Lucy Osburn died. Her death certificate listed the cause as diabetes. Her death received scant acknowledgment by Sydney Hospital but she has been consistently acknowledged by her admirers and nurses as the founder of Nightingale nursing in Australia. Among the many monuments to her achievements is the Lucy Osburn-Nightingale Museum at Sydney Hospital in her old rooms in the Nightingale Wing of Sydney Hospital.

Lucy Osburn was energetic, clever, and multilingual. She loved entomology, dogs, reading, and was a loyal friend and relative. She battled chronic ill-health with an indomitable spirit. She was sent to Australia ill-equipped and largely achieved a near-impossible task. Her success was in the transformation of nursing practice and consequent improvement in patient care, as well as pioneering high status women's professional careers in public institutions. Her problems owed much to her ill-defined powers and her implementation of a strictly hierarchical, inward-looking system which emphasised obedience at the expense of staff development and mobility.