LSGM based SOFC cells are prone to suffer from performance degradation during operation, when they are used with Ni-containing anodes. In this study, one of the causes for performance degradation in an LSGM-based SOFC system was investigated. XRD and SEM studies coupled with EDX measurements revealed that formation of an insulating LaNiO₃ layer is possible in such cells depending on the processing conditions. This ionic insulator phase forms a layer on the anode side of the LSGM and may block oxygen ion diffusion through electrolyte. A possible solution to hinder the formation of LaNiO₃ phase is the use of doped ceria (XDC; where X = La or Sm) as a protective layer with proper processing route. Cross-sectional EDX analyses coupled with SEM showed that lanthanum doped ceria (LDC) was a very effective protection layer for LSGM. In contrast to LDC, samarium doped ceria (SDC) protective layer was ineffective. An inexpensive and feasible fabrication procedure for SOFC assembly was demonstrated with a thin (1-5 µm) and dense protective layer-electrolyte couple coated onto the anode.