A new synthetic route including a hydrothermal treatment to produce Al-stabilized α-phase nickel hydroxide with an extremely fine grain size but with good crystallinity has been evaluated. The particle size and morphology were characterized by transmission electron microscopy (TEM). The results showed that α-phase nickel hydroxide with nano-sized, well-crystallized particles exhibits not only a high electrochemical capacity of up to 380–400mAhg−1, but also an excellent rate-capacity performance and long time stability during electrochemical cycling with up to 100% overcharge as well as under a long-term float charge. In contrast, the β-phase nickel hydroxide showed a lower specific capacity and poorer cycling stability under similar overcharge cycling. Except for a lower volumetric energy density than the β-phase, other properties make the Al-stabilized α-phase nickel hydroxide a superior battery material. There is still, however, room to increase the volumetric energy density of the α-phase beyond what is possible to reach by the β-phase via further improvement of the tap density and the specific capacity of the α-phase.