One of the crucial factors for improving intermediate-temperature solid oxide fuel cell (SOFC) performance relies on the reduction in the activation loss originating from limited electrode reaction kinetics. We investigated the properties and functions of the nanocrystalline interlayer via quantum simulation and electrochemical impedance analyses. Electrode impedances were found to decrease several folds as a result of introducing a nanocrystalline interlayer and this positive impact was the most significant when the interlayer was a highly ionic-conducting nanocrystalline material. Both exchange current density and maximum power density were highest in the ultrathin SOFCs (fabricated with microelectromechanical systems (MEMS) compatible technologies) consisting of a 50 nm thick nano-gadolinia doped ceria (GDC) interlayer. Oxygen vacancy formation energies both at the surface and in the bulk of pure zirconia, ceria, yttria-stabilized zirconia, and GDC were computed from density functional theory, which provided insight on surface oxygen vacancy densities.