Structural change and the charge compensation mechanism of lithium-rich layered cathode (Li1.23Fe0.15Ni0.15Mn0.46O2) in charged and discharged states were investigated. Selected area electron diffraction analysis revealed that in discharged state, an initial structure composed of a single phase of monoclinic layered rock-salt changed to a mixture of hexagonal layered rock-salt and spinel-like structures. In charged state, the spinel-like phase became dominant as transition-metal ions migrate. 57Fe Mössbauer spectroscopy, X-ray absorption spectroscopy (XAS), and Soft-XAS showed that the valence of Fe and Ni ions approximately changed from Fe3+ to Fe3.2+ and Ni2+ to Ni3.5+ during charge-discharge, although Mn ions remained as Mn4+. Various oxidation states of oxide ions such as superoxide, peroxide, and hole states have also been detected in charged state. Considering that actual discharge capacity was 255 mAh/g, the contribution to charge compensation from the valence change of Fe and Ni ions was extremely small, and it only contributed to about one-third of total capacity. Therefore, the mechanism to yield high capacity of the Li1.23Fe0.15Ni0.15Mn0.46O2 cathode relates strongly to the redox reaction of oxide ions. Moreover, the decrease in capacity during charge-discharge cycling was mainly due to the irreversible redox reaction of Mn, Fe, and oxide ions.