Surface treatment of nano-crystalline γ-Fe2O3 was examined to improve its electrochemical performances for lithium battery. Removal of residual phases on the surface by chemical oxidation with NO2BF4 was confirmed by TG measurement and FT-IR spectroscopy, and the process improved charge–discharge characteristics; higher capacity and better reversibility were obtained. The charge–discharge mechanism was studied by X-ray diffraction measurement and Mössbauer spectroscopy. The reversible charge–discharge reaction of the nano-size γ-Fe2O3 was proceeded by a phase transition between the spinel and the disordered rock-salt type, which was previously claimed to be an irreversible process for the bulk materials. The nano-size effect of the phase transitions and the charge–discharge mechanism will be discussed.