This work introduces a novel silver composite cathode with a surface coating of scandia‐stabilized zirconia (ScSZ) nanoparticles for application in intermediate temperature solid oxide fuel cells (IT‐SOFCs). The ScSZ coating is expected to maximize the triple boundary area of the Ag electrode, ScSZ electrolyte, and oxygen gas, where the oxygen reduction reaction occurs. The coating also protects the porous Ag against thermal agglomeration during fuel cell operation. The ScSZ nanoparticles are prepared by sputtering scandium‐zirconium alloy followed by thermal oxidation on Ag mesh. The performance of the solid oxide fuel cells with a gadolinia‐doped ceria electrolyte support is evaluated. At temperatures <500 °C, our optimized Ag‐ScSZ cathode outperforms the bare Ag cathode and even the platinum cathode, which has been believed to be the best material for this purpose. The highest cell peak power with the Ag‐ScSZ cathode is close to 60 mW cm−2 at 450 °C, while bare Ag and optimized Pt cathodes produce 38.3 and 49.4 mW cm−2, respectively. Long‐term current measurement also confirms that the Ag‐ScSZ cathode is thermally stable, with less degradation than bare Ag or Pt.