Due to their accessible lattice oxygen redox (l‐OR) at high voltages, Li‐rich layered transition metal (TM) oxides have shown promising potential as candidate cathodes for high‐energy‐density Li‐ion batteries. However, this l‐OR process is also associated with unusual electrochemical issues such as voltage hysteresis and long‐term voltage decay. The structure response mechanism to the l‐OR behavior also remains unclear, hindering rational structure optimizations that would enable practical Li‐rich cathodes. Here, this study reveals a strong coupling between l‐OR and structure dynamic evolutions, as well as their effects on the electrochemical properties. Using the technique of neutron total scattering with pair distribution function analysis and small‐angle neutron scattering, this study quantifies the local TM migration and formation of nanopores that accompany the l‐OR. These experiments demonstrate the causal relationships among l‐OR, the local/nanostructure evolutions, and the unusual electrochemistry. The TM migration triggered by the l‐OR can change local oxygen coordination environments, which results in voltage hysteresis. Coupled with formed oxygen vacancies, it will accelerate the formation of nanopores, inducing a phase transition, and leading to irreversible capacity and long‐cycling voltage fade.