The hydrogen evolution reaction (HER) during the electrochemical oxidation of borohydride is the major efficiency loss in direct borohydride fuel cells (DBFCs). Here we show that an YH₂–Pd thin film electrode, which combines catalysis on the Pd layer and H storage in the YH₂ layer, can effectively promote the energy utilization efficiency. The YH₂ layer can absorb the atomic H generated during the BH₄⁻ oxidation on the Pd layer and effectively suppress HER. The absorbed H can be further oxidized into H₂O in NaOH solution, allowing full utilization of the 8 electrons in BH₄⁻ oxidation. The YH₂–Pd electrode can be regarded as a hybridization of the anodes in conventional DBFCs and nickel-metal hydride batteries. The hydrogen absorption/desorption during the electrochemical process is in situ monitored by optical transmittance measurements, which provide key insights into the interconversion mechanisms and energetics of the hydridic, neutral and protonic hydrogen species.