  Reversible hydrogen uptake and the metal/dielectric transition make the
Mg/MgH$_2$ system a prime candidate for solid state hydrogen storage and
dynamic plasmonics. However, high dehydrogenation temperatures and slow
dehydrogenation hamper broad applicability. One promising strategy to improve
dehydrogenation is the formation of metastable $\gamma$-MgH$_2$. A nanoparticle
(NP) design, where $\gamma$-MgH$_2$ forms intrinsically during hydrogenation is
presented and a formation mechanism based on transmission electron microscopy
results is proposed.Volume expansion during hydrogenation causes compressive
stress within the confined, anisotropic NPs, leading to plastic deformation of
$\beta$-MgH$_2$ via (301) $\beta$ twinning. It is proposed that these twins
nucleate $\gamma$-MgH$_2$ nanolamellas, which are stabilized by residual
compressive stress. Understanding this mechanism is a crucial step toward
cycle-stable, Mg-based dynamic plasmonic and hydrogen-storage materials with
improved dehydrogenation. It is envisioned that a more general design of
confined NPs utilizes the inherent volume expansion to reform $\gamma$-MgH$_2$
during each rehydrogenation
