In the present paper, electrical measurements, air-annealing experiments, and X-ray photoelectron spectroscopy (XPS) were used to study the lateral growth of nickel coating on the ceramics substrate during electroplating of Ba3Co2Fe24O41(Co(2)Z) hexaferrite multilayer chip inductors (MLCI). It was found that resistivity of the ferrite and inductance of MLCI decreased continuously during the electroplating. The lateral growth of metal coating occurred only after a certain time of electroplating, but not immediately. XPS analysis showed that a large part of Fe3+ on the ferrite surface had been reduced to Fe2+ during 20 min of nickel electroplating. However, the resistance-degraded specimens can be restored through 2 h of air annealing at 650degreesC during which all the Fe2+ was reoxidized to Fe3+. Based on the results obtained, it was concluded that Fe3+ reduction to Fe2+ induced by hydrogen during electroplating must be responsible for the functional degradation of the ferrite, which then resulted in the lateral growth of metal coating on the ceramics surface.