A series of Li1.2Mn0.6-x/2Ni0.2-x/2FexO2 (x=0, 0.03, 0.06, 0.10) cathode materials has been prepared by a modified Pechini process. The structure and morphology of the obtained materials have been examined by X-ray diffraction (XRD), scanning electron microscope (SEM) and transmission electron microscope (TEM) techniques. The electrochemical properties of Li1.2Mn0.6-x/2Ni0.2-x/2FexO2 have been characterized systematically and Li1.2Mn0.585Ni0.185Fe0.03O2 exhibits the best cyclic stability and high-rate capability. The Li1.2Mn0.585Ni0.185Fe0.03O2 electrode delivers a large reversible discharge capacity of 261.6 mAh g−1 at 0.1C-rate with a high capacity retention rate of 90.9% after 80 cycles. Meanwhile it displays obviously improved rate capability with the capacity of 187.3 mAh g−1 at the 1C-rate and stable cycling performance of 165 mAh g−1 after 150 cycles. The effects of a small amount of Fe doping are explored through ex-situ XRD, X-ray photoelectron spectroscopy (XPS), high-resolution transmission electron microscope (HRTEM), differential capacity vs. voltage (dQ/dV) plots and electrochemical impedance spectroscopy (EIS). The results show stable layered structure and well-crystallized particle surface for Li1.2Mn0.585Ni0.185Fe0.03O2 electrode in contrast with spinel nanodonmains distribution and amorphous surface region for Li1.2Mn0.6Ni0.2O2 electrode upon cycling, which account for the outstanding electrochemical performance of Fe doped Li1.2Mn0.6Ni0.2O2 cathode material.