Cryo-stage transmission electron microscopy (TEM), supported by Density Functional Theory (DFT), is employed to explore the microstructure of magnesium hydride (MgH2) powders. Mechanical milling results in deformation twinning of the hydride. The crystallography of the twins is established. DFT analysis shows that the twin unit cell is just as thermodynamically stable as the undeformed α-MgH2 matrix. It is hypothesized that the twins contribute significantly to the observed milling-induced kinetic enhancement by acting as high diffusivity paths for hydrogen. Energy-filtered TEM analysis on partially desorbed MgH2 demonstrates that nucleation and growth of metallic magnesium occurs non-uniformly. Larger powder particles are a composite of isolated magnesium grains heterogeneously nucleated on the remaining hydride. Smaller particles are either fully transformed to magnesium or remain entirely a hydride. There is little evidence for any “core–shell” structure. It is also shown that in situ hydrogen desorption in the TEM is not representative of the elevated-temperature ex situ sequence.