High-performance electrode materials for lithium-ion batteries (LIBs) are urgently required to meet the requirement of the widespread use of energy storage devices from small-to large-scale applications. In this regard, ultra-small nanocrystalline SnO2 particles with a size of ∼3 nm are synthesized using a simple hydrothermal method and investigated as a high capacity anode material for LIBs. The SnO2 anode shows a high reversible capacity of 1026 mAh g−1 at a current density of 150 mA g−1. The kinetic study of the anode material is conducted and compared using cyclic voltammetry, electrochemical impedance spectroscopy and galvanostatic intermittent titration techniques and the lithium diffusion coefficient at open circuit potential is calculated to be 3.71978 × 10−13, 1.818 × 10−14, and ∼1.82 × 10−16 cm2 s−1, respectively. The reaction mechanism of highly reversible SnO2 nanoparticles is investigated using ex-situ XRD, XPS, in-situ X-ray absorption near edge spectroscopy, and TEM and the results reveal the formation of lithium-tin alloy in the lithiated electrode and reversible formation of SnO2 upon delithiation.