The ternary alloy Li5AlSi2 is successfully synthesized by a hydrogen-driven chemical reaction at 500–650 °C and used as an anode for Li-ion batteries. It is observed that a higher dehydrogenation temperature induces a higher phase purity and a larger particle size and that the Li5AlSi2 prepared at 600 °C exhibits the best electrochemical properties. The Li5AlSi2 prepared at 600 °C delivers a Li-extraction capacity of approximately 849 mAh/g at 100 mA/g via a two-step reaction in the first charge cycle, corresponding to 3.8 mol Li ions. More interestingly, the Li-insertion capacity of the delithiated sample reaches 1303 mAh/g during the subsequent discharge process, much higher than the previous Li-extraction capacity. The capacity retention is determined to be approximately 59% after 25 cycles, which is superior to that of the sample prepared by the conventional melting technique. Structural analyses and CV measurements reveal that the active lithium storage species is converted to the amorphous Li–Si and Li–Al alloys instead of the initial Li5AlSi2 after 1 charge/discharge cycle, which is believed to be the most important reason for the rapid capacity fading upon cycling.