The phrase "בנות ישראל נאות הן" is found in Mishnah Nedarim 9:10.

In this Mishnah, it discusses situations where a husband makes a vow forbidding his wife from benefiting from him, and how the sages would annul such vows to preserve the marriage. The Mishnah comments that "בנות ישראל נאות הן" ("the daughters of Israel are beautiful") to emphasize that physical appearance is not the only important aspect, but that their beauty also comes from their modesty and inner character.