Pinning-controlled Sm₂(Co, M)₁₇ (M = Fe, Cu, and Zr) magnets with cellular nanostructures are the strongest high-temperature permanent magnets. The squareness factor of such magnets is smaller than those of nucleation-controlled permanent magnets, leading to a lower-than-ideal maximum energy product. One of the main reasons for this poor squareness is that the pinning strength is weaker at cell edges than at 1:5H cell boundaries. However, the structure of these edges remains a topic of debate. To identify the microstructure of cell edges, electron diffraction, TEM bright/dark field imaging, and HRTEM imaging on a model magnet Sm₂₅Co_50.2Fe_16.2Cu_5.6Zr_3.0 (mass fraction, %) were performed using both [100]_2:17R and [101]_2:17R zone axes. The results revealed a rhombohedral 2:17R' phase at some of the edges, with one faulting basal layer in the 2:17R lattice. Further comparative investigations revealed that all the extra superlattice reflections result from the 2:17R' phase, excluding the previously identified 2:17H or Sm_{n + 1}Co_{5n - 1} or their mixture that can only produce a part of such superlattice reflections. Owing to the 2:17R' phase with a faulted basal plane, the free energy at the cell edges is higher than that of the 2:17R cell interiors, leading to repulsive domain-wall-pinning unfavorable for the squareness factor. This study provides important evidence for understanding the microstructural origin of the poor squareness factor obtained for Sm₂(Co, M)₁₇ permanent magnets.