A novel strategy for confined synthesis of graphene wrapped nano-sized LiMn0.5Fe0.5PO4 hybrid composite has been developed, including co-precipitation and solvothermal reactions. The LiMn0.5Fe0.5PO4 nanoparticles with a constrained diameter of 20 nm are homogeneously wrapped by a continuous interconnected graphene sheets. The mechanism and composite structure evolution during the process are carefully investigated and discussed. With the shortened Li+ diffusion paths and enhanced electron conductivity, the hybrid composite shows high discharge capacity and superior rate performance with the discharge capacities of 166 mA h g−1 at 0.1 C and 90 mA h g−1 at 20 C. Excellent cycle stability is also demonstrated with only about 7.8% capacity decay after 500 cycles at 1 C.