The electrochemical behavior related to cycle performance and capacity fading for LiV3O8 thin-film positive electrodes has been investigated. These electrodes experience a slight capacity loss over an initial 200 cycles, and the capacity decreases rapidly upon further cycling. This two-stage capacity fading is related to the growth of a surface layer and exfoliation of active materials, which occurs at different stages of the cycling period. The growth of the surface layer is a major reason for the increased impedance. However, it can prevent the dissolution of active materials and retard further electrode degradation, which leads to the gentle decline in capacity over the initial 200 cycles. In the later cycling period, the exfoliation of active materials causes poor electronic contacts in the film and results in severe capacity fading.