The aim of this work was to study failure and stabilization mechanisms of Li-graphite electrodes. As model electrolyte systems, tetrahydrofuran (THF), propylene carbonate (PC), THF containing water contamination, and THF/PC solutions were used. A variety of electrode behavior can be observed in these solutions including reversible intercalation at high capacity, cyclability with deteriorating capacity, and in cases of dry THF and PC solutions, disability of Li intercalation. Chronopotentiometry, chronoamperometry, cyclic voltammetry impedance spectroscopy, electron microscopy, in situ and ex situ XRD, and surface sensitive FTIR spectroscopy were used in order to understand the reasons for the stability or failure of Li-graphite intercalation anodes. In PC and dry THF, massive solvent reduction occurs with a relatively low degree of electrode passivation. These processes change the electrode’s morphology and electrically isolate carbon particles. At low concentration of water (>40 ppm) and PC (optimum 1 M) in THF, the surface chemistry of graphite,differs considerably from that in dry THF or PC solutions. Passivating surface films are formed and provide a protective envelope for the electrode. Their structure and mechanism of formation, as well as the correlation between the surface chemistry, 3D structure, morphology, and the electrochemical behavior of the electrodes in solution, are discussed.