After the recent upsurge of interest in the layered LiNi1/3Co1/3Mn1/3O2 system for use as a cathode material for rechargeable lithium batteries, we have studied the charge compensation mechanism and structural perturbations occurring during cycling of the novel layered system of Li1.05Ni0.35Co0.25Mn0.4O2 coated with nano-crystallized LiCoO2, which effectively improved the rate capability. In addition, the LiCoO2 evidently suppressed any structural change of the Li1.05Ni0.35Co0.25Mn0.4O2. In situ X-ray absorption spectroscopy (XAS) measurements were performed utilizing a novel in situ electrochemical cell, specifically designed for long-term X-ray experiments. The cell was cycled at a moderate rate through a typical Li-ion battery operating voltage range (2.8-4.8 V). The electrode contained 1.9 mg of Li1.05Ni0.35Co0.25Mn0.4O2 on a 25 mu m Al foil, and had an area of 0.79 cm(2). XAS measurements were performed at different states of charge (SOC) during cycling, at the Ni, Co, and the Mn edges, revealing details about the response of the cathode to Li insertion and extraction processes. Extended X-ray absorption fine structure region of the spectra revealed the changes of bond distance and coordination number of Ni, Co, and Mn absorbers as a function of the SOC of the material. We found that the oxidation states of the transition metals in the system are Ni2+, Co3+, and Mn4+ in the fully discharged condition. During charging the Ni2+ is oxidized to Ni4+ through an intermediate stage of Ni3+, Co3+ is oxidized almost to Co4+. Utilizing a combination of Faraday's calculation and XAS results, the Co was found to be at Co3.89+ at the end of the charge, whereas Mn was found to be electrochemically inactive and remains as Mn4+. These measurements on this cathode material confirmed that the material retains its symmetry and good structural short-range order leading to superior cycling. (c) 2007 The Electrochemical Society.