Sodium‐ion batteries (SIBs) are considered as a low‐cost complementary or alternative system to prestigious lithium‐ion batteries (LIBs) because of their similar working principle to LIBs, cost‐effectiveness, and sustainable availability of sodium resources, especially in large‐scale energy storage systems (EESs). Among various cathode candidates for SIBs, Na‐based layered transition metal oxides have received extensive attention for their relatively large specific capacity, high operating potential, facile synthesis, and environmental benignity. However, there are a series of fatal issues in terms of poor air stability, unstable cathode/electrolyte interphase, and irreversible phase transition that lead to unsatisfactory battery performance from the perspective of preparation to application, outside to inside of layered oxide cathodes, which severely limit their practical application. This work is meant to review these critical problems associated with layered oxide cathodes to understand their fundamental roots and degradation mechanisms, and to provide a comprehensive summary of mainstream modification strategies including chemical substitution, surface modification, structure modulation, and so forth, concentrating on how to improve air stability, reduce interfacial side reaction, and suppress phase transition for realizing high structural reversibility, fast Na+ kinetics, and superior comprehensive electrochemical performance. The advantages and disadvantages of different strategies are discussed, and insights into future challenges and opportunities for layered oxide cathodes are also presented. Recent progress in layered oxide cathodes for sodium‐ion batteries (SIBs) from air stability, interface chemistry, and phase transition are comprehensively summarized. The intrinsic degradation mechanisms behind electrochemical performance and mainstream modification strategies are systematically sorted out and analyzed. The remaining challenges, promising optimization strategies as well as endeavor directions to break current limitations are also presented for the future design of high‐performance layered oxide cathodes for SIBs.