In this article, nickel hydroxide nanocrystals are synthesized for the first time by a simple air-plasma electrolysis setup. Aqueous solution of nickel nitrate is used as the electrolyte. Once the electrolysis is started, a green powder is produced at the contact point of the plasma and the solution. Electron microscopy (FESEM and TEM) of the powder indicates that most of the particles are spherical with 25–30 nm size. Elemental analysis, Fourier transform infrared spectroscopy and X-ray diffraction pattern reveal that the powder is nano-crystalline Ni(OH)20.75H2O with rhombohedral structure (or a-Ni(OH)2). To evaluate the lattice strain and dislocation density, the methods of Scherrer, Williamson–Hall, Williamson–Smallman and also Halder–Wagner are used. Comparisons show that the Halder–Wagner method provides more accurate results. The size of the nano-crystallites is estimated to be about 2.38 nm by this method, and the strain and dislocation density are obtained at 0.3299 and 17.72 line m-2, respectively. The results of this research confirm that the room-temperature atmospheric plasma electrolysis can be a promising and efficient candidate for the synthesis of hydroxide nanocrystals, which may have wide applications in the energy storage systems and supercapacitor industries.