She was giving evidence to the Historical Abuse Inquiry about the former St Joseph's Catholic children's home in Termonbacca.
The inquiry is examining claims of abuse at 13 homes and training centres in Northern Ireland from 1922 to 1995.
The woman said Termonbacca was in large grounds with a high gate and could seem "intimidating" to young children.
She said she believed children were well fed and well dressed as well as having a roof over their heads.
But, she said:  "They were very institutionalised. I would have been concerned for their emotional welfare".
When asked about one nun, whose name is not being revealed, the former social worker replied:  "I thought highly of her, I thought she was very caring.
"She did have a lot of children in her care, but I thought she did try and see them as individuals. And I thought she wanted the best for them."
The woman also told the inquiry that no child ever complained to her about sex abuse at the home.
She said she was only aware of one case of physical abuse, when a nun admitted grabbing a 13-year-old boy by the throat.
"I think they were overwhelmed by the emphasis on religion, they seemed to feel oppressed by the regime" she said.
Termonbacca and another Derry home, Nazareth House, were run by the Sisters of Nazareth.
The inquiry, being held in Banbridge, County Down, is chaired by retired judge Sir Anthony Hart and is considering cases in 13 residential institutions.
Public hearings are due to finish in June 2015, with the inquiry team to report to the Northern Ireland Executive by the start of 2016.
A nun in charge of a Londonderry children's home in the 1970s was "very caring", an ex-social worker has said.