The electrochemical properties of nanocomposite Fe2O3–Se thin film prepared by pulsed laser deposition (PLD) method have been investigated by cyclic voltammetry and charge/discharge measurements. A large reversible capacity of nanocomposite Fe2O3–Se thin film was found to be around 650mAhg−1. A new couple of reduction and oxidation peaks at 1.4 and 1.8V were observed from cyclic voltammogram for the first time. Our data demonstrated that nanocomposite Fe2O3–Se exhibit larger capacity and better cycle performance than pure Fe2O3. The electrochemical reaction mechanisms of Fe2O3–Se with lithium were examined by X-ray photoelectron spectroscopy (XPS), high resolution transmission electron microscopy (HRTEM) and selected-area electron diffraction (SAED). The reversible conversions reaction of nanosized metal Fe with Li2Se and Li2O formed after initial discharge process into FeSe and Fe2O3 respectively were revealed.