The Hull Hospital in western Quebec fired the unidentified woman in December 2005, and she challenged it with the province's labor ministry, the Ottawa Citizen reported.
Hospital lawyer Charles Saucier told the newspaper there were medical grounds in the firing.
"She weighed more than 300 pounds and had a problem with excessive sweating," he said. "An operating room is supposed to be a sterile environment without bacteria. There was an excessive amount of bacteria in the operating room air because of her sweating, creating a risk of infection."
He said the hospital tried to accommodate the nurse and she changed her clothing frequently during surgery, but her clothing remained wet.
Her union has 30 days to appeal the arbitration ruling, the report said.