X-ray absorption spectroscopy was carried out to investigate local structural changes around Fe and Zn atoms of the nano-crystalline spinel ferrite ZnFe2O4 anode material at various states-of-charge during the 1st and 2nd lithiation/de-lithiation. From the X-ray absorption near edge structure (XANES) and extended X-ray absorption fine structure (EXAFS), we propose a possible structure evolution process of the ZnFe2O4 electrode during the 1st discharge and charge cycle. A mixture of metallic iron, ZnO, metallic zinc, LiZn and Li2O phases seem to be formed as the cell is firstly discharged to 0.02V. Instead of the original ZnFe2O4 spinel phase, the metallic iron and zinc particles are re-oxidized to Fe2O3 and ZnO phases during the subsequent de-lithiation. A reversible redox reaction between Fe2O3, ZnO and lithium ions is found in the 2nd cycle. The formation of SEI layer in the initial cycles plays a major role in the irreversible capacity of the electrode. The inactive disordered ZnO formed due to the conversion reaction of ZnFe2O4 during the 1st lithiation is probably the main reason for the poor electrochemical behavior of the nano-crystalline ZnFe2O4 electrode.