The fundamental processes that govern plasticity and determine strength in crystalline materials at small length scales have been studied for over fifty years. Recent studies of single-crystal metallic pillars with diameters of a few tens of micrometres or less have clearly demonstrated that the strengths of these pillars increase as their diameters decrease, leading to attempts to augment existing ideas about pronounced size effects with new models and simulations. Through in situ nanocompression experiments inside a transmission electron microscope we can directly observe the deformation of these pillar structures and correlate the measured stress values with discrete plastic events. Our experiments show that submicrometre nickel crystals microfabricated into pillar structures contain a high density of initial defects after processing but can be made dislocation free by applying purely mechanical stress. This phenomenon, termed 'mechanical annealing', leads to clear evidence of source-limited deformation where atypical hardening occurs through the progressive activation and exhaustion of dislocation sources.