Transition metal oxide has been attracting significant attention as a potential alternative anode materials for high-performance lithium-ion batteries. However, the materials still suffer from poor performance due to the large volume expansion during reversible electrochemical reaction between the materials and Li ions. Here, we report on successfully synthesized graphene encapsulated Co3O4 (GE-Co3O4) quantum dots (QDs) by a facile chemical reaction. We also demonstrate an improved performance in Li storage with GE/Co3O4 by suppression of volume expansion during charge/discharge processes. To evaluate the electrochemical characteristics for the lithium storage the composites were examined by cyclic voltammetry and charge/discharge process. The GE-Co3O4 showed a large reversible capacity of 820 mA h/g at a constant current density of 1000 mAg-1 even after 100 cycles and excellent rate capacity and cyclic stability compared to pristine Co3O4 QDs. The encapsulated graphene shell can obstruct the pulverization by inhibiting the volume expansion of Co3O4 QDs, which was supported by the fact that the morphology and structure of GE-Co3O4 QDs was not significantly changed after 100 cycles. We also confirmed through scanning Kelvin probe microscopy, transmittance electron microscopy, and energydispersive X-ray spectrometer that the morphology of GE-Co3O4 QDs was maintained whereas that of Co3O4 QDs was almost fully decomposed. The encapsulation of graphene can play important roles such as suppression of volume expansion and producing a sufficient opposing force to aggregation during the cycles, resulting in a long stable life cycle.