The surface chemistry of ammonia coadsorbed with atomic oxygen on Ni(110) single-crystal surfaces was studied by temperature-programmed desorption (TPD) and X-ray photoelectron spectroscopy (XPS). At intermediate oxygen coverages, direct ammonia adsorption on nickel sites is suppressed, but a new high-temperature reaction regime is generated. Desorption of ammonia from rehydrogenation of NHx surface fragments (identified by XPS) takes place around 400 K, concurrently with the production of water and molecular hydrogen. Experiments with deuterium labeling indicated extensive isotope scrambling and hydrogen transfer from nitrogen- to oxygen-containing surface intermediates. The optimum yields seen for this 400 K state at intermediate oxygen coverages strongly suggest the direct interaction of the adsorbed ammonia with oxygen atoms at the end of the -Ni-O- rows that form upon reconstruction of the surface. Hydrogen transfer between ammonia and oxygen appears to take place directly via hydrogen bonding, and to be reversible but biased toward water formation. An equilibrium is reached between the produced water and the reacting surface oxygen and hydrogen.