We have used Ni and Co K-edge conversion electron yield X-ray absorption fine structure (CEY-XAFS) and conventional XAFS in transmission mode to investigate LiNi0.8Co0.15Al0.05O2, one of the promising cathode materials for Li-ion batteries. The former technique is surface-sensitive, having a probing depth of similar to 90 nm, while the latter is bulk-sensitive. X-ray absorption near edge structure analysis revealed that the bulk-averaged Ni valences for cycle-tested cells and aging-tested cells are lower than that for a fresh cell throughout charging. Further reduction of Ni atoms is observed at the surface of the cathode material particles, and the ranges of the Ni valence change upon charging are narrower than that for a fresh cell, indicating the presence of Ni atoms which are unaffected by charging. Extended X-ray absorption fine structure analysis revealed that the change in bond lengths [Ni-O, Ni-M (M=Ni,Co), Co-O, and Co-M] is consistent with the change in the Ni valence. These electronic and structural changes occur predominantly at the surface and are probably the main causes of capacity fading.