Layered germanium phosphide, which combines the advantages of both germanium and phosphorus, is believed to be a potential anode for sodium ion battery. Here, the sodium storage mechanism and electrochemical performance of layered germanium phosphide have been deeply investigated by advanced in-situ transmission electron microscopy technique combining half-cell testing. Dynamic reaction process reveals that individual layered germanium phosphide nanoflake undergoes total area expansion of 248% without any detectable fracture or cracking in sodiation. In contrast, germanium phosphide experiences multi-step reactions, i.e. intercalation and alloying, accompanied by sequentially forming NaxGeP (0 < x < 1/3), layered NaGe3P3, and amorphous NaGe and NayP (0 < y ≤ 3). Moreover, the germanium phosphide electrode delivers a high first discharge/charge capacity of 1124/996 mA h g−1 within voltage window of 0.005–2.5 V. By narrowing voltage window in 0.15–1.5 V, the electrode displays good cycle stability with the capacity retention of 330 mA h g−1 after 100 cycles. Our study provides useful fundamental understanding and practical strategy for the application of germanium phosphide as anode in sodium ion batteries.