Objective Women with breast cancer face threats to body image following surgery. Nipple‐sparing mastectomy with immediate breast reconstruction (NSM + IBR) may minimise body image disturbance as this preserves the woman's skin and areola complex. We assessed levels of body image disturbance and psychological distress in women undergoing NSM + IBR. To further understand the body image–distress relationship, we investigated the potential moderating effect of self‐compassion and appearance investment on this relationship. Methods Women diagnosed with breast cancer (N = 75) who had undergone NSM + IBR completed online questionnaires including the Body Image Scale, general (Depression, Anxiety and Stress Scales) and cancer‐specific (Impact of Event Scale) psychological distress and Self‐Compassion Scale and Appearance Schemas Inventory – Revised. Results Mean general and cancer‐specific psychological distress scores were within normal ranges, and body image disturbance was moderately low. Body image was positively correlated with depression, stress, Impact of Event Scale scores and appearance investment and negatively correlated with self‐compassion. MANCOVA analyses indicated a significant moderating effect of self‐compassion and appearance investment on the body image disturbance–distress relationship (for depression, stress and intrusion), such that participants with high self‐compassion and low appearance investment experienced lower distress than individuals with low self‐compassion and high appearance investment. Conclusions Moderately low levels of psychological distress and body image disturbance suggest NSM + IBR may minimise adverse psychological impacts of mastectomy. Increased body image disturbance was associated with psychological distress and moderated by self‐compassion and appearance investment, suggesting a potential role for these characteristics as the focus of psychological interventions to minimise the negative impacts of mastectomy. Copyright © 2016 John Wiley & Sons, Ltd.