Using in situ X-ray diffraction, the capacity fading mechanism of LiMn2O4 under various conditions has been studied. The capacity fading can be monitored by the structural changes during cycling. At the beginning of cycling, the structural changes closely follow the charge-discharge curve: the main structure starts in cubic I, transfers to cubic II, and ends as cubic III during charge, and reverses the course during discharge. These phase transitions track the charging and discharging curves with small hysteresis. However, with an increased amount of capacity fading during cycling, the structural changes deviate from the charge-discharge curve: Bragg peaks representing cubic I and II remain present at the end of charge, when the whole cathode should have been transferred to cubic III. Similarly, the residues of cubic II and III were observed at the end of discharge. The amount of residues increases with increasing capacity fading by cycling at 55 degrees C, overcharging to 5.2 V, or after multiple cycling at normal condition. Adding a tris(pentafluorophenyl) borane (TPFPB) compound in electrolyte can reduce the residues and washing the cathode with solvent can partially restore the lost capacity in the subsequent cycling, showing the important role of electrolyte decomposition in capacity fading.