X-ray photoelectron spectroscopy studies showed that the surface segregation of Mg atoms and valence band width in the nanocrystalline Mg2Ni alloy are greater compared to those observed in polycrystalline Mg2Ni thin films. Especially, a strong surface segregation of Mg atoms was observed for the Mg2Ni/Pd composites. In that case, Mg atoms strongly segregate to the surface and form a Mg-based oxide layer under atmospheric conditions. The lower lying Ni and Pd atoms form a metallic subsurface layer and could be responsible for the observed relatively high hydrogenation rate. Furthermore, the valence band broadening observed in the nanocrystalline Mg2Ni alloys and Mg2Ni/Pd composites could also significantly influence their hydrogenation properties. Results show, that the shape and broadening of the valence band of the Mg2Ni/Pd composites strongly depends on the preparation conditions. (C) 2007 International Association for Hydrogen Energy. Published by Elsevier Ltd. All rights reserved.