Environmental transmission electron microscopy is used in combination with density functional theory calculations to study the redox stability of a nickel/yttria-stabilized zirconia solid oxide fuel cell anode. The results reveal that the transfer of oxygen from NiO to yttria-stabilized zirconia triggers the reduction reaction. During Ni reoxidation, the creation of a porous structure, due to mass transport, accounts for the redox instability of the Ni-based anode. Both the expansion of NiO during a redox cycle and the presence of stress in the yttria-stabilized zirconia grains are observed directly. Besides providing an understanding of the Ni–YSZ anode redox degradation, the observations are used to propose an alternative anode design for improved redox tolerance.