A thermoelectric material, γ-Na0.7CoO2, with a high figure of merit, ZT>1, at high temperatures has been studied using the atomic pair distribution function (PDF) analysis of pulsed neutron powder diffraction data. We have found significant PDF peak broadening in the correlation between sodium and oxygen atoms at high temperatures. The broad peak indicates that a sodium atom frequently leaves a NaO6 prism. In other words, sodium atoms hop in a two-dimensional layer at high temperatures. The PDF intensity of the Na–O correlation below a critical length, where a sodium atom is leaving a prism, is inversely proportional to thermal conductivity. This suggests that the short phonon lifetime originates from the frequent sodium hopping in the two-dimensional layer, leading to high-performance thermoelectric generation.