Iron oxide, a promising anode material for lithium ion batteries, has a high theoretical specific capacity but exhibits poor cycling performance and rate capability. To resolve these issues, 150 nm sized carbon coated, hollow Fe3O4 nanoellipsoids are designed in this study. Owing to the relatively high utilization ratio of Fe3O4 and the buffer provided by the carbon layer, this composite has enhanced lithium ion storage properties and long cycle life. From half-cell measurements, the capacity is found to be in excess of 400 mAh g−1 even after 1000 cycles at 5 A g−1. And then, a facile and practical strategy is used to gain a relatively high compressed density (∼1.87 g cm−3), so the volumetric capacity of the Fe3O4@C electrode can be further enhanced by subjecting it to compression. In the full cell test, the Fe3O4@C electrode has a specific capacity of 400 mAh g−1 and volumetric capacity of 749 mAh cm−3 after 100 cycles. The improvement in cycling stability can be attributed to minimal volume expansion and the stability of the solid-electrolyte interphase (SEI) layer, over the nanoparticles. Finally, the evolution of solid-electrolyte interphase layer is indirectly monitored and the progressive loss of active lithium is quantitatively measured.