Purpose: The purpose of this study is to evaluate the effects of Lavender inhalation on sleep, depression and stress of institutionalized elderly. Methods: The methods used in the study follows a non-equivalent pre- and post-test design. 39 institutionalized elderly were recruited using a convenient sampling method that assigned them to the experimental or the control group. The experimental group were then provided with essential Lavender oil, as part of the aroma inhalation intervention, to inhale before sleeping for 7 days. The collected data were analysed with SPSS 18.0 (windows program), using frequency percentage (%), a Chi-square test and an independent t-test. Results: The results were that the experimental group had significantly higher sleep status scores(t=5.195, p=.000), and lower depression scores (t=-5.479, p=.000), physical stress scores (t=-5.741, p=.000) and psychological stress scores (t=-4.233, p=.000) than those in the control group. Conclusion: This study suggests that aroma inhalation, as part of aroma therapy, be applied and comprehensively adopted as a method of nursing intervention for improvement of sleep, depression and stress for institutionalized elderly.