Magnesium nickel hydride (Mg2NiH4) used as negative electrode material in nickel-metal hydride (Ni-MH) secondary battery is modified by nano-nickel via mechanical milling. In this paper, we systematically investigate the microstructure and electrochemical properties of the modified system with different milling durations. X-ray diffraction (XRD) and high resolution transmission electron microscopy (HRTEM) analyses confirm the amorphous transformation of Mg2Ni-based hydride and a novel NiH0.75 nanocrystalline with a diameter of about 5 nm embedding or covering on the surface of the base particle has been observed. Its formation mechanism and positive effects on electrochemical properties of the Mg2NiH4 have also been elaborated. Electrochemical measurements show that the 5 h milled composite possesses markedly increased discharge capacity up to 896 mAh g−1. With prolonging the milling duration from 5 h to 40 h, the discharge capacity at the 10th cycle increases from 99 mAh g−1 to 359 mAh g−1. Besides, the discharging procedure changes from stepwise processes to one single-step process with increasing the milling duration. Tafel polarization test shows that the nano-nickel modified system exhibits a much better anti-corrosion ability during charging/discharging cycles. Meanwhile, both the charge-transfer reaction on the alloy surface and hydrogen diffusion inside the alloy bulk are enhanced with nano-nickel modification.