The comprehension of solute-induced phase transformations is crucial in a variety of research fields such as catalysis, memory switching or energy storage. We study solute induced phase transformations on the model magnesium-hydrogen (Mg-H) system which provides high lattice expansion during the phase transformations. In situ precipitation and growth of MgH2 is analyzed in an environmental transmission electron microscope (ETEM), combining electron energy loss spectroscopy (EELS) and various imaging techniques. It is found that the Mg-hydride (MgH2) formation proceeds through the formation of nanocrystals that are separated by low-angle grain boundaries. This change in the microstructure is easily detectable in the ETEM and allows studying the growth of the hydride phase. The EELS results confirm the direct match between the nanocrystalline microstructure and the MgH2 phase. We attribute this microstructural change to large strains and stresses between the matrix and the MgH2 created during the transformation process. Half-spherical as well as finger-like regions of MgH2 is observed in the film. Combing the ETEM studies with finite element method simulations on the local stress distribution in the lamella suggests an influence of local stresses on the growth behavior. As the FEM simulations reveal, the local stress distribution depends on the shape of the hydrided region. This includes stresses that occur after the hydride nucleation and during the growth of the hydride. Hydrogen diffusion is suggested to be fast along the Pd/MgH2 interphase as well as along the high angle grain boundaries and less fast in low angle grain boundaries in MgH2, in contrast to the very slow diffusion in the MgH2 grains. This paper highlights the interdependency of the hydride growth and its self-created local stress fields in an in situ ETEM study. We consider these results not to be limited to the Mg-H system, but being of more general nature. (C) 2019 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved.