This paper proposes a strategy to reduce the diffusion induced stress and enhance the capacity of a layered electrode by allowing the plastic deformation of current collector. Based on analytical formulations of the stress in whole electrode, three types of elastoplastic behaviors of current collector, i.e. pure elastic deformation, plastic shakedown and cyclic plasticity, are identified. Criterions separating the three cases are proposed. It is found applying a thin current collector and allowing it to plastically yield in the charge/discharge cycles is beneficial not only to capacity as more space can be provided for active materials but also to electrochemical stability because the stress in active layer is significantly reduced. Structural design corresponding to plastic shakedown shows good balance between the said improvements and structural safety, whereas the case of cyclic plasticity further enhances the improvements. Therefore, structural designing scheme is provided for the former case according to the criterion of plastic shakedown but for the latter one based on the Coffin–Manson relation with expected cycle life.