Diagnostic reasoning expertise is a core competency of advanced practice nurses (APNs) because it facilitates accurate diagnoses and proper management of patients' health problem. As newly enrolled APN students have widely varying educational and clinical backgrounds, their individual characteristics may influence their diagnostic reasoning performance. To investigate levels of diagnostic reasoning among new APN students as well as students' characteristic affecting such reasoning levels. This study employed a descriptive correlational design. Over 3 years, 114 Korean APN students in an advanced health assessment course were recruited to participate in the survey study. The students' self-reported Diagnostic Reasoning Assessment scores were used to categorize them into pre-novice, novice, advanced beginner, and competent levels. Students also self-assessed their competence in performing physical examinations using a 126-item questionnaire. Ordinal logistic regression analysis identified the student characteristics predicting their diagnostic reasoning levels. 55 students (48.2%) rated themselves as novices in diagnostic reasoning, followed by 40 students (35.1%) who rated themselves as advanced beginners. Overall, students reported a lack of competence in performing physical examinations, with a mean score of 2.84 out of 4 points. Only physical examination competence significantly predicted the students' diagnostic reasoning levels after controlling for the effects of other variables. Being in a higher diagnostic reasoning level relative to being in a pre-novice, novice, or advanced beginner level was 16.1, 2.6, and 1.9 times greater in the physical examination competence, respectively. This study found that promoting physical examination competence can be an effective teaching strategy for enhancing the diagnostic reasoning of newly enrolled APN students, especially for students who have poor diagnostic reasoning performance. : A well-designed advanced health assessment course could improve the physical examinations and diagnostic reasoning skills of APN students, regardless of their educational and clinical backgrounds.