Lithium intercalation hosts as the positive electrode (cathode) are central to the chemistry and key to the energy density of rechargeable lithium batteries. The high cost and toxicity of the commercially used LiCoO2 cathode have prompted extensive searches for alternatives. While manganese oxides have been investigated most extensively, iron oxides are even more attractive from cost and environmental standpoints. However, search for iron oxides of conventional crystalline structures and micrometer particle sizes as lithium intercalation cathodes has been greeted with disappointing results. Here we report a nanocrystalline ferric oxide that simultaneously exhibits very high lithium intercalation capacity, excellent rate capability and capacity retention upon cycling. These properties reveal thermodynamics and kinetics of the nanocrystalline material inherently different from those of its microcrystalline counterpart, and suggest promise of nanostructured intercalation compounds as electrodes for rechargeable lithium batteries. (C) 2003 The Electrochemical Society.