Highly fine, dispersive, and active catalysts are essential for lowering the operating temperature of MgH2, a promising high-capacity material for solid-state hydrogen storage. In this work, ultrafine Ni nanoparticles (2–6 nm) are synthesized from the precursor nickel acetylacetonate (C10H14NiO4) on the surface of MgH2 by H2 plasma reduction process, followed by further ball milling. The obtained composite could rapidly release more than 6.5 wt % H within 10 min at 275 °C. Even at a low temperature of 225 °C, up to 6 wt % H could be desorbed. The MgH2–Ni composite also exhibits excellent low-temperature hydrogenation kinetics and almost no capacity degradation over nine hydrogenation/dehydrogenation cycles. The significant improvement in the hydrogen-storage properties is attributed to the in situ formation of ultrafine and stable Mg2NiH0.3 nanocrystals during cycling. This work provides a convenient approach to synthesize ultrafine metal nanoparticles for catalytic applications in the field of high energy storage density hydride materials.