Grains constitute the building blocks of polycrystalline materials and their boundaries determine bulk physical properties like electrical conductivity, diffusivity and ductility. However, the structure and evolution of grains in nanostructured materials and the role of grain boundaries in reaction or phase transformation kinetics are completely uncharted, despite likely importance in catalysis, batteries and hydrogen energy technology applications. To fill this gap, we investigate the kinetics of (de)hydriding phase transformations in individual Pd nanoparticles. We find dramatic evolution of single particle grain morphology upon cyclic exposure to hydrogen, which we identify as the reason for the observed rapidly slowing sorption kinetics, and as the origin of the observed kinetic compensation effect. This constitutes the first observation of the impact of grain growth on kinetic processes occurring inside nanostructured materials, provides a physically sound mechanistic explanation of kinetic compensation effects, and highlights the importance of single particle experiments for their systematic investigation.