A novel synthesis of controlled crystallization and granulation was attempted to prepare nano-scale β-Ni(OH)2 cathode materials for high power Ni-MH batteries. Nano-scale β-Ni(OH)2 and Co(OH)2 with a diameter of 20nm were prepared by controlled crystallization, mixed by ball milling, and granulated to form about 5μm spherical grains by spray drying granulation. Both the addition of nano-scale Co(OH)2 and granulation significantly enhanced electrochemical performance of nano-scale Ni(OH)2. The XRD and TEM analysis shown that there were a large amount of defects among the crystal lattice of as-prepared nano-scale Ni(OH)2, and the DTA–TG analysis shown that it had both lower decomposition temperature and higher decomposition reaction rate, indicating less thermal stability, as compared with conventional micro-scale Ni(OH)2, and indicating that it had higher electrochemical performance. The granulated grains of nano-scale Ni(OH)2 mixed with nano-scale Co(OH)2 at Co/Ni=1/20 presented the highest specific capacity reaching its theoretical value of 289mAhg−1 at 1C, and also exhibited much improved electrochemical performance at high discharge capacity rate up to 10C. The granulated grains of nano-scale β-Ni(OH)2 mixed with nano-scale Co(OH)2 is a promising cathode active material for high power Ni-MH batteries.