The synthesis of carbon nanotubes with predefined structure and functionality plays a central role in the field of nanotechnology, whereas the inhibition of carbon growth is needed to prevent a breakdown of industrial catalysts for hydrogen and synthesis gas production. The growth of carbon nanotubes and nanofibres has therefore been widely studied. Recent advances in in situ techniques now open up the possibility of studying gas-solid interactions at the atomic level. Here we present time-resolved, high-resolution in situ transmission electron microscope observations of the formation of carbon nanofibres from methane decomposition over supported nickel nanocrystals. Carbon nanofibres are observed to develop through a reaction-induced reshaping of the nickel nanocrystals. Specifically, the nucleation and growth of graphene layers are found to be assisted by a dynamic formation and restructuring of mono-atomic step edges at the nickel surface. Density-functional theory calculations indicate that the observations are consistent with a growth mechanism involving surface diffusion of carbon and nickel atoms. The finding that metallic step edges act as spatiotemporal dynamic growth sites may be important for understanding other types of catalytic reactions and nanomaterial syntheses.