The stability of the NiO cathodes in molten carbonate fuel cell (MCFC) has been improved through microencapsulation of the NiO cathode with nanostructured Co. Cobalt was deposited on the NiO cathode using an electroless deposition process. The electrochemical oxidation behavior of the Co-coated electrodes is similar to that of the bare NiO cathode. The cobalt-coated electrodes have a lower solubility in the molten carbonate melt when compared to bare nickel oxide electrodes in the presence of cathode gas. The solubility decreased more than 50% due to microencapsulation with cobalt. The thermal oxidation rate was also lower in case of the cobalt-encapsulated electrode. Impedance data from the modified electrode indicate that the oxygen reduction reaction depended inversely on the CO2 and directly on the oxygen partial pressures respectively suggesting a similar reaction mechanism to that of nickel oxide. The results indicated that cobalt-encapsulated NiO is a viable solution in the development of alternate cathodes for MCFC applications.