The nucleation and growth of metallic particles within metal-doped oxides in reducing conditions is relevant to the processing of materials for catalysis, fuel cells, and structural applications. Here, the precipitation of metallic nickel during the internal reduction of nickel-doped yttria stabilized zirconia is studied with electron microscopy and SQUID magnetometry. It is shown that the microstructure evolution proceeds in three distinct stages, each with its own kinetics description, dependent on the porosity and grain size. 0.5 M percent NiO doped YSZ was synthesized, sintered, pressed into pellets, and then exposed to 1000 °C in 2% H2 for various times. Metallic Ni0 particles (>100 nm) are first formed in pores connected to grain boundaries; subsequently, metallic Ni0 particles (20–50 nm) precipitate at grain boundaries; and finally, superparamagnetic Ni0 particles (<10 nm) form within the bulk YSZ grains. The transitions between stages depend upon concentration gradients and electrostatic potentials that act upon the relevant transporting species, namely oxygen vacancies, electrons, nickel ions and zirconium vacancies.