We use first-principles pseudopotential-based density functional theory calculations to determine the electronic structure, energetics and relative stability of polytypes, and stacking faults of nickel hydroxide. Our results show that the 1H polytype of nickel hydroxide is the most stable, which agrees with the experiment. The close-packed polytypes 2H(2) and 3R(2) are higher in energy by only similar to 0.01 eV per formula unit, thereby accounting for the observation of faulted structures. The stacking faults with 3R(2) motifs are associated with higher energy (22.2 mJ/m(2)) compared to those with 2H(2) motifs (7.2 mJ/m(2)) accounting for the experimentally observed transformations in the faulted samples.