Li-compensated LiPON (Li-LiPON) thin film solid electrolyte has been deposited by sputtering a sintered Li-rich Li3.3PO4 target instead of the normally Li3PO4 target, showing an improved Li ionic conductivity of 3.2 x 10(-6) S/cm. All-solid-state thin film lithium batteries (TFLBs) with the structure of Si/SiO2/Ti/Au/LiCoO2/LiPON/Li have been fabricated by adopting Li-UPON and normal UPON (N-LiPON) electrolyte layers, respectively. The galvanostatic cycling tests show much better rate performance and higher capacity retention ratio of TFLB with Li-LiPON electrolyte. We suggested that the Li-UPON solid electrolyte helps to reduce the space-charge layer effect induced by Li ionic defects.