Exploiting high-capacity cathode materials with superior reliability is vital to advancing the commercialization of sodium-ion batteries (SIBs). Layered oxides, known for their eco-friendliness, adaptability, commercial viability, and significant recent advancements, are prominent cathode materials. However, electrochemical cycling over an extended period can trigger capacity fade, voltage hysteresis, structural instability, and adverse interface reactions which shorten the battery life and cause safety issues. Thus, it is essential to require an in-depth understanding of degradation mechanisms of layered oxides. In this review, the crystal and electronic structures of layered oxides are revisited first, and a renewed understanding is also presented. Three critical degradation mechanisms are highlighted and deeply discussed for layered oxides, namely Jahn-Teller effect, phase transition, and surface decomposition, which are directly responsible for the inferior electrochemical performances. Furthermore, a comprehensive overview of recently reported modification strategies related to degradation mechanisms are proposed. Additionally, this review discusses challenges in practical application, primarily from a degradation mechanism standpoint. Finally, it outlines future research directions, offering perspectives to further develop superior layered cathode materials for SIBs, driving the industrialization of SIBs. A schematic illustration of the degradation mechanisms is drawn, showing corresponding strategies and application toward future development of sodium-ion batteries (SIBs). SIBs play an essential role in promoting the application of renewable energy systems. Therefore, it is essential to fully understand the degradation mechanism of the layered cathode and its constitutive relationship to modification strategies, which would aid in reducing the gap between the actual and theoretical energy densities of SIBs. image