Deterioration mechanism of Li(Ni, Co, Mn)O2 and Zr-O surface modified electrodes has been elucidated using epitaxial thin films synthesized by pulsed laser deposition. The electrodes comprise a mixture of layered rock-salt and spinel phases. The deterioration mechanism is analyzed using cyclic voltammetry, in situ X-ray diffraction measurements, and in situ neutron reflectometry. The spinel phase in the electrodes has low electrochemical activity and is not involved in Li insertion/extraction. The amount of Li participating in the charge-discharge reactions in the layered rock-salt phase increases with cycling, inducing a phase change at the electrode surface, lowering the reversibility. In contrast, in the Zr-O surface modified electrode, the spinel phase does not increase on charging/discharging. Thus, the Zr-O modification stabilizes the surface of layered rock-salt structure, thereby improving the cycling characteristics. Also, after the Zr-O modification, the Li concentration in the liquid electrolyte near the electrode/electrolyte interface increases during charging/discharging. The Zr-O surface modification not only stabilizes the electrode surface but also causes changes on the electrolyte side. Using the mixed model electrodes, we elucidate the mechanism of electrode deterioration and the origin of the improvement in cycling characteristics occurring on surface modification.