The electrochemical behavior of β-Ni(OH)2 nanosheets in half-lithium cells was studied. The first discharge curve exhibited two well-defined plateaux giving two well-defined peaks in the CV curve. The plateaux were assigned to reduction of Ni in the nanosheets to metallic Ni and the formation of a solid electrolyte interface (SEI), respectively. By contrast, NiO exhibited a single peak. On further cycling, the curve shapes for β-Ni(OH)2 resembled those for NiO, but the peak assigned to Ni oxidation was shifted to higher voltages. Cycling the electrode made from the nanosheets over the potential range 3.0–0.0 V provided capacities above 1430 mAh g−1 after the second cycle that were largely retained on further cycling. This surprisingly high capacity level substantially exceeds the theoretical capacity of Ni(OH)2 and is twice the theoretical value for NiO. Removing the plateau assigned to SEI formation by limiting the lower potential to 0.85 V caused not only the expected decrease in discharge capacity, but also substantial capacity fading with cycling, which provides direct evidence for the central role of SEI formation. The unusually high capacity obtained is probably due to formation of the reversible interface as demonstrated by transmission electron microscopy (TEM) images of the discharged and charged electrode.