The dehydrogenation mechanism during the incubation period in nanocrystalline MgH₂ (low α: converted metal fraction and dα/dt) and the reasons for the occurrence of the incubation period at 320, 350, and 400 °C were investigated. Pre-existing Mg crystallites can enhance Mg nucleation during the incubation period, as suggested by the estimated activation energy for nucleation (12 ± 2 kJ per mol H). The released H-atoms enter MgH₂ as interstitials, as indicated by the MgH₂ unit-cell contraction, resulting in increased equatorial Mg–H bond length, decreased charge-density distribution in the interstitial region, as observed from the charge-density maps, and decreased H–H distance in the {001} plane up to the midway of the incubation period. Eventually, hydrogen vacancies are created, as indicated by the red shift in the E_g and A_1g peaks of Raman spectra. The high estimated activation energy for the growth of Mg (209 ± 8 kJ per mol H) renders it difficult and explains the reason for the presence of an incubation period.