O3/P2-layered oxides, especially O3–NaCrO2, have been widely investigated as cathode materials for sodium-ion batteries due to their high stability and flexible synthesis procedure, but their low electron conductivity, the toxicity of Cr(VI) and cation disorder limit their applications. Here, we present O3–Na(Cr0.8Mn0.2)O2 as a promising cathode, which has a higher average storage voltage than O3–NaCrO2 and a practical useable capacity of ca. 100 mAh/g. The low volume change (~0.90%), lack of toxic Cr6+ formation and cation ordering in the optimized O3–Na(Cr,Mn)O2 structure ensure a potentially long cycle life. In situ XRD was used to monitor the phase formation at high temperature and to unveil the working mechanism of the O3–Na(Cr,Mn)O2 electrode during cycling. XAS and DFT investigations revealed variations in the local structure and the sequence of charge transfer of the transition metal during cycling. This work sheds light on the sodium storage mechanism of O3-layered oxides from micro- and electronic-structure points of view and reveals the role of transition metals in the working mechanism and performance.