Polarization studies have indicated occurrence of three reactions on the cathode surface during precipitation of nickel hydroxide. Out of the three reactions, the nitrite forming reaction followed by conversion to ammonium ion might be the reaction path. The reaction scheme is well supported by the trends in variations in open-circuit potential. Detail prolonged galvanostatic precipitation studies have shown that (OH)−/Ni2+ ratio plays an important role in determining the phase of the nickel hydroxide. A ratio of (OH)−/Ni2+ higher than 6 with sufficient nickel ion in bath ensures β-nickel hydroxide with bigger particles and lesser H2O molecules within. Maintaining these ratios at lesser levels forms α-nickel hydroxide with finer size and more H2O molecules within. The mechanism of these products formations has been explained in this paper. It is also observed that finer size with higher surface area and higher H2O molecules in crystal structure results in higher discharge capacity.