Pure and Sn-modified LiFePO4 crystalline powders are successfully synthesized by sol-gel method. The addition of Sn to the precursor changes the morphology of the material causing partial formation of nanorods and leads to increase of average crystallite size from 33nm up to ca. 40nm. The X-ray photoelectron spectroscopy, transmission electron microscopy (TEM) and energy dispersive X-ray spectroscopy indicate that Sn outdiffuses to the LiFePO4 crystal surface during calcination process and creates a few nanometer-thick SnO2 surface layer. The TEM analysis combined with Raman spectroscopy indicates also that LiFePO4 particles are embedded in amorphous carbon. Electrochemical testing shows an improved capacity, as well as better stability and cycling reversibility of Sn-modified materials compared to pure LiFePO4. Reduced material degradation during charging/discharging cycling and excellent lithium intercalation reversibility in Sn-modified LiFePO4 is attributed to a positive surface modification effect of the SnO2 layer.