Positive electrode active materials, Al-substituted α-Ni(OH)2, with a high tap-density and high performance for alkaline nickel-based rechargeable batteries have successfully been synthesized using a polyacrylamide (PAM) assisted two-step drying method and subsequent hydrothermal treatment at 140 °C for 2 h. X-ray diffraction (XRD), infrared spectroscopy (IR), scanning electron microscopy (SEM), laser particle size analysis, tap-density measurement, cyclic voltammetry (CV), electrochemical impedance spectroscopy (EIS), and charge–discharge test are used to characterize the physical and electrochemical properties of the synthesized material. The tap-density of the resulting powders reaches 1.84 g cm−3, which is significantly higher than that of α-Ni(OH)2 powders obtained by the conventional co-precipitation (CCP) and hydrothermal (HT) methods. Compared with commercial spherical β-Ni(OH)2, the resulting sample is electrochemically more active, providing discharge capacities of 315.0 and 255.2 mAh g−1, and volume capacities of 579.6 and 469.6 mAh cm−3 at rates of 0.2 C and 5 C, respectively. It is also found that although the hydrothermal treatment has a slight negative effect on the tap-density, it can improve the crystallinity of α-Ni(OH)2 and promote the anion exchange of NO3 − by OH−, resulting in a much better electrochemical performance.