Impedance measurement was conducted at the entire cell level for studying of the Ni-MH rechargeable batteries. An improved equivalent circuit model considering diffusion process is proposed for simulation of battery impedance data at different charge input levels. The cell capacity decay was diagnosed by analyzing the ohmic resistance, activation resistance, and mass transfer resistance of the Ni-MH cells with degraded capacity. The capacity deterioration of this type, Ni-MH cell, is considered in relation to the change of activation resistance of the nickel positive electrodes. Based on the report and surface analysis obtained from the energy dispersive X-ray spectroscopy, the composition formula of metal-hydride electrodes can be closely documented as the AB5 type alloy and the “A” elements are recognized as lanthanum (La) and cerium (Ce). The capacity decay of the Ni-MH cell is potentially initiated due to starved electrolyte for the electrochemical reaction of active materials inside the Ni-MH battery, and the discharge product of Ni(OH)2 at low state-of-charge level is anticipated to have more impeding effects on electrode kinetic process for higher power output and efficient energy delivery.