The effects of mechanical milling on the microstructure, morphology and electrochemical performance of graphite powders with respect to lithium insertion are studied. After 150 h of ball-milling, the well-graphitized graphite has been pulverized into small particles with a size of about 50 nm, in which there are a lot of excess vacancies, microcavities and metastable carbon interstitial phases with sizes around 13 Angstrom. Due to the large surface energy, the merging of single particles is favoured and results in the formation of agglomerates with average size about 1 mu m. Voids are formed among the agglomerated particles. The ball-milled graphite shows reversible specific capacity for lithium of 700 mA h g(-1) (L1.88C6) with large hysteresis. The large reversible capacity is due mainly to Li doping at vacancies, microcavities (or at the edges of the metastable carbon interstitial phase) and voids. The bonding change between the interstitial carbon and the carbon in the aromatic plane that is induced by insertion of Li atoms leads to hysteresis. During charge-discharge cycles, the reversible capacity above I V decreases rapidly, which may be due to some vacancies and microcavities being annihilated by moveable and some bound interstitial carbon and to electrolyte penetrating gradually into voids formed by agglomerated particles during the Li insertion and desertion process.