The thermal hysteresis exhibited in plastic crystal compounds greatly reduces their cyclic efficiency, limiting their potential for replacing current environmentally harmful refrigerants. A mechanistic understanding of the origins of this hysteresis has yet to be established. Here, we systematically investigate the transformation kinetics of the model plastic crystal, neopentyl glycol (NPG), through microscopic and calorimetric techniques. We reveal an asymmetry between the forward (heating) and reverse (cooling) transitions. We also demonstrate that the forward transformation is rate-limited by the rate of growth of rotationally disordered domains. In contrast, the reverse transformation is rate-limited by the nucleation of the ordered crystal domain, demonstrated by the sharp exothermic peaks in calorimetry and rapid self-nucleation phenomena observed optically. This nucleation limitation is largely responsible for the large thermal hysteresis in NPG, which we observe to be as large as 16.7 °C for an approximately 10 mg sample cooled at 0.5 °C min−1. These findings demonstrate the underlying origin of the thermal hysteresis and introduce a direction to mitigate hysteresis in plastic crystal transformations.