Fuel rods in 63 bundles failed starting in late 2001 during their second cycle of operation in a U.S. boiling water reactor (BWR). Poolside and hot cell examinations were performed on failed and non-failed bundles to understand the failure mechanism and to gain insight into the failure root cause. Results showed that the fuel cladding failed due to accelerated corrosion that resulted in the formation of localized hydrides on the outer cladding surface prior to failure. Primary cladding perforation then occurred due to cracking of the brittle hydride lenses, rather than through-wall corrosion. The specific characteristics of these nodular corrosion-related hydride failures present a new or previously unrecognized variation of a BWR cladding corrosion failure mechanism. Characteristics of the damaged rods suggested that the hydride localizations formed under the action of local thermal gradients due to local variations in oxide thickness. Finite element modeling of hydrogen diffusion under simplified conditions indicated that it is a plausible explanation for their formation. Investigations related to possible contributions of the BWR coolant chemistry on the failures led to the discovery of Li in the damaged cladding oxide at a concentration that has been associated with high corrosion rates. Based on SIMS analyses of selected rods from the affected BWR and from other unaffected BWRs, the possible role of Li in initiating elevated corrosion and in advancing corrosion to a point of failure is discussed.