As a novel and potential transition metal dichalcogenide (TMDC), NbSe2 has low ion diffusion barrier when applied in energy-storage systems, such as traditional lithium-ion batteries and novel magnesium-ion batteries (MIBs). In this work, we have developed a novel hexagonal NbSe2 material with a nanosized surface via a facile microwave–hydrothermal method. The Li+-storage mechanism of NbSe2 with surface conversion and internal intercalation is thoroughly revealed by in situ X-ray diffraction (XRD), ex situ high-resolution transmission electron microscopy, and ex situ scanning electron microscopy. Besides, Mg2+ intercalation mechanism is confirmed via ex situ XRD and ex situ X-ray photoelectron spectroscopy for the first time. In addition, as the cathode for MIBs, NbSe2 with a nanosized surface exhibits a high rate capacity of 101 mA h g–1 at 200 mA g–1 with a high discharge plateau at 1.30 V. Our work builds a deep understanding of ion-storage mechanisms in TMDCs and provides guidance for designing new electrode materials with high electrochemical performances.