The electronic structure of the alloyed transition-metal phosphorus trichalcogenide van der Waals Fe1–xNixPS3 compounds is studied using X-ray absorption spectroscopy and resonant photoelectron spectroscopy combined with intensive density functional theory calculations. Our systematic spectroscopic and theoretical data demonstrate the strong localization of the Fe- and Ni-ions-derived electronic states that leads to the description of the spectroscopic data as belonging simultaneously to Mott–Hubbard and charge-transfer insulators. These findings reveal Fe1–xNixPS3 as unique layered compounds with dual character of the insulating state, pointing to the importance of these results for the description and understanding of the functionality of this class of materials in different applications.