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The NMC cathode with high Ni content has high energy density with a lower cost, but it suffers from lower initial Coulombic efficiency, poor rate capability, and cyclic stability when cycled at >4.2 V vs Li in both liquid and solid electrolytes (LEs and SEs). In all solid-state batteries, these issues are aggravated by the additional interfacial parasitic reaction between the NMC and the SE, which governs the bulk ion dynamics and is dependent on the type of SE and the operating voltage. Here, we have studied how the interfacial reactivity affects intraparticle Li ion dynamics, fatigue phase formation, and evolution by a state of charge (SOC)-resolved, temperature-resolved XRD approach and direct halide (Li3YCl6) vs sulfide (Li6PS5Cl) comparison under identical conditions in sc-NMC particles. DSC, TGA, and ex-situ XPS were performed to explore the interfacial reactivity. We show that Li6PS5Cl is more reactive with NMC; consequently, the fatigue phase evolves, even at the first cycle charge. The reactivity and hence fatigue phase formation are enhanced with increasing SOC. With Li3YCl6 as the catholyte, the fatigue phase formation is minimal during the first cycle charge, and it mitigates the chemical/thermal instability of the charged cathode. Overall, our results indicate the formation of a bulk fatigue phase in sc-NMC as a critical factor, alongside interfacial impedance and a chemomechanic effect contributing to capacity fading in all solid-state batteries. Additionally, the halide electrolytes can mitigate interfacial reactions and consequently prevent the formation of the fatigue phase, thereby enhancing cycle longevity.