Low-cost sodium-ion batteries have demonstrated great prospects in energy storage, among which layered transition metal oxides hold great potential as a cathode material. However, the notorious phase transition in layered cathode materials has greatly hampered their cycle life due to large volume changes upon desodiation/sodiation. In this study, by adopting an O3-type NaNi1/3Fe1/3Mn1/3O2 (NFM) with controlled synthesis temperatures, we have revealed that the grain size is closely related to its phase transition behaviors. The layered material with a smaller grain size and more distorted lattice tends to experience a shorter plateau of the O3–P3–O3 phase transitions during the charge/discharge process. Despite having a lower nominal discharge capacity without the phase transition plateau, its cycling stability increases from 77.4% to 96.2% after 100 cycles with greatly reduced intragranular cracks. The smaller grain size and lattice distortion act as a barrier that prevents the smooth layer from gliding upon sodium intercalation and deintercalation. This study focuses on the influence of grain size on battery cycle stability and provides a basis for future analysis of the structural instability of layered materials.