Li-insertion into rutile and anatase structured TiO2 has been studied using first principles calculations. It has been show that intercalation behaviour and its temperature dependence cannot be explained by thermodynamics alone. The absence of insertion into rutile at room temperature is explained in terms of the inaccessibility of the low energy configurations due to highly anisotropic diffusion. The importance of anisotropy of elastic screening of Li-Li interactions and diffusion of Li-ions in understanding intercalation properties has been demonstrated. In anatase, the calculations correctly predict a phase separation in anatase into a Li-rich phase (Li0.5TiO2) and Li-poor phase. The mechanism underlying the thermodynamics of Li-insertion is dominated by the strong coupling between the structural and electronic degrees of freedom. (C) 2004 Elsevier B.V. All rights reserved.