The effects of surface coating of Y(OH)3 on the electrochemical performance of spherical Ni(OH)2 were studied by cyclic voltammetry (CV) with soft-embedded electrode (SE-E). The coating was performed by chemical surface precipitation under different conditions. The structure, morphology, chemical composition and electrochemical properties of two different samples with surface coating of Y(OH)3 were characterized and compared. The results show that a two-step oxidation process exists in the oxidation procedure of spherical Ni(OH)2 corresponding to the formation of Ni(III) and Ni(IV), respectively. The conversion of Ni(III) to Ni(IV) is regarded as a side reaction in which Ni(IV) species is not stable. The presence of Y(OH)3 on the particle surface can restrain the side reactions, especially the formation of Ni(IV). The application of coated Ni(OH)2 to sealed Ni–MH batteries yielded a charge acceptance of about 88% at 60°C. The results manifest that the high-temperature performance of Ni(OH)2 electrode is related to the distribution of the adding elements in surface oxide layer of Ni(OH)2, the sample with dense and porous coating surface, larger relative surface content and higher utilization ratio of yttrium is more effective.