In-situ synchrotron X-ray diffraction (SR-XRD) combined with transmission electron microscope (TEM) and first-principle calculations was employed to reveal the mechanism of hydrogen-induced decomposition of 18R-type long period stacking ordered (LPSO) structure. 80 wt.% of the structure was decomposed by 0.05 MPa H2 at 280 °C in 90 min, producing 6 wt.% Mg, 50 wt.% MgH2, 15 wt.% YH2, 9 wt.% Mg2Ni, and 3 wt.% Mg2NiH4. The formation of YH2 nanoparticles is the fastest process due to the strong interaction between hydrogen atoms and dispersive L12-Ni6Y8 clusters. Furthermore, the metastable Mg6Ni nanocrystals, which transformed to Mg2Ni and Mg nanoparticles, was detected.