We report the in situ microscopy observation of an unnatural phase of Ni, a highly strained hexagonal close-packed (hcp) form which we believe is stabilized by heteroepitaxial growth on the (001) face of MgO. We find that the nanosized hcp nickel islands transform into the normal face-centered cubic structure when the size of the islands exceeds a critical value (about 2.5 nm thick with a lateral size of ∼5nm). The structural transition proceeds via a martensitic change in the stacking sequence of the close-packed planes. The formation of hcp Ni nanostructures with an unusually large crystallographic c∕a ratio (∼6% larger than ideal hcp) is very interesting for spintronic and recording applications where large uniaxial anisotropies are desirable.