Mixing a small amount of Al(OH)3 powder with a LiCoO2 cathode material is demonstrated to improve markedly the cycle performance and thermal stability of commercial grade LiCoO2/graphite lithium-ion batteries. Al(OH)3-mixed LiCoO2/graphite prismatic cells exhibit excellent capacity retention as high as 95% after 400 cycles with negligible polarization build-up. Moreover, the thermal stability of the cells is greatly improved by Al(OH)3 mixing, which is confirmed by higher residual and recovery capacity ratios after storage at 90°C compared with a pristine cell. The beneficial effects of Al(OH)3 are found to be related mainly to an improvement of the cathode side, which is ascribed to reduced unwanted side-reactions with the electrolyte.