We reported facile fabrication of a novel β-Ni(OH)₂/NiFe₂O₄ heterostructure composite by KOH alkaline etching three-component NiFeAl-layered double hydroxides (NiFeAl-LDHs) precursor for ethanol oxidation electrocatalysis. Detailed investigation of evolution progress from NiFeAl-LDHs precursor to β-Ni(OH)₂/NiFe₂O₄ demonstrated that growth of such composite structure underwent partial dealumination and spontaneous lattice rearrangement of NiFeAl-LDHs to form α-Ni(OH)₂/NiFeAl-LDHs compound, followed by deep dealumination and topological transformation to produce β-Ni(OH)₂/NiFe₂O₄. Compared to NiFeAl-LDHs precursor, β-Ni(OH)₂/NiFe₂O₄ heterostructure prepared in 15 M KOH alkaline had enhanced activity (approximately 10 times) for ethanol electrocatalysis, smaller electron transfer resistance of 1.33 Ω, and increased long-term stability. In situ diffuse reflectance infrared Fourier transform spectroscopy (DRIFTS) and in situ Raman spectroscopy were further performed to explore reaction mechanism and transformation process of β-Ni(OH)₂/NiFe₂O₄ in ethanol electrocatalysis, which verified that the process of electron donating and electron receiving between NiFe₂O₄ and β-Ni(OH)₂ realized more electron transfer and greatly improved the fuel utilization.