Fine nickel powders with a narrow particle size distribution was prepared by reducing nickel hydroxide in an aqueous solution. The study analyzed nickel powder formation and reduction pathways, discussing the effects of the molar ratio of hydrazine hydrate to nickel hydroxide, hydrazine concentration, and the amount of surfactant PEG6000 on particle size, surface morphology, and dispersion. X-ray diffraction (XRD), scanning electron microscopy (SEM), and laser particle size analysis revealed that nickel particle nucleation occurred on the nickel hydroxide surface, which gradually dissolved during the reaction. Increasing the molar ratio of hydrazine to nickel hydroxide initially decreased and then increased the nickel particle size. Higher hydrazine concentrations reduced particle size. A small amount of PEG6000 improved dispersion, while higher amounts preserved the morphology of nickel hydroxide. Adjusting the surfactant amount allowed control of the average particle size between 1-2μm.