Relationships between the electronic structure, magnetostriction, and phase stability of the GdNi1−xCox system have been investigated. Increasing the concentration of Co in GdNi1−xCox (0 ⩽ x < 0.5) series leads to anisotropic changes of lattice parameters within the CrB-type crystal structure which are qualitatively similar to, but are stronger than, those observed upon the application of magnetic field to the Co-free, binary GdNi near its Curie temperature, TC. The magnetic field and temperature dependent X-ray powder diffraction study of GdNi0.85Co0.15 shows that the strong linear thermal expansion effects near TC are, however, absent. Density functional theory calculations show that hypothetical “GdCo” has positive formation energy, and density of states at the Fermi level indicates intrinsic instability of “GdCo” as opposed to GdNi. The enhanced exchange interaction energy of “GdCo” compared to GdNi supports the experimentally observed increasing Curie temperature of GdNi1−xCox with increasing x(Co).