Conventional characterization techniques such as transmission electron microscopy (TEM) cannot visualize the subtle structural changes in Rh nanoparticles during the reduction of NO to N2 on their surface. Hence, in this study, we used an environmental reaction science high-voltage electron microscope equipped with a quadrupole mass spectrometer (QMS) system to conduct operando atomic-scale analysis of the NO reduction process on Rh nanoparticles supported on ZrO2. This innovative setup enabled us to observe dynamic surface structural changes while simultaneously monitoring the production of N2 and consumption of NO under relevant reaction conditions. High-resolution TEM observations and kinetic calculations based on QMS data confirmed the presence of a pseudocyclic transitional state between Rh metallic and RhO2 within an unstable oxide monolayer on the surface of the Rh nanoparticles, which is a hitherto undocumented phenomenon. A comparison of experimental data with the corresponding simulated images revealed plausible catalytic mechanisms for the reduction of NO to N2 at three different temperature ranges (200–500, 500–600, and 600–700 °C). At low temperatures, the reaction primarily occurs on a thin RhO2 film formed on the nanoparticle surface, which defies the longstanding consensus that the reduction of NO occurs on Rh metal sites. Our methodology enabled the direct observation of transient surface states and revealed their ability to dictate the overall reaction dynamics. The findings of this study provide insights into surface catalytic reactions on nanoparticles under practical conditions as well as can guide future studies on catalytic mechanisms.