γ-phase LiV2O5, which shows superior electrochemical performance as cathode material in Li-ion batteries, was prepared by annealing the polyoxovanadate cluster Li7 [V15O36(CO3)]. The reaction mechanism was studied using operando X-ray absorption fine structure (XAFS), powder X-ray diffraction (PXRD), and X-ray photoelectron spectroscopy (XPS) analyses. The X-ray absorption near edge structure (XANES) and XPS results reveal that γ-LiV2O5 undergoes two-electron redox reaction per V2O5 pyramid unit, resulting in a large reversible capacity of 260 Ah/kg. The extended X-ray absorption fine structure (EXAFS) and PXRD analyses also suggest that the V-V distance slightly increases, due to the reduction of V5+ to V4+ during Li ion intercalation as the material structure is maintained. As a result, γ-LixV2O5 shows highly reversible electrochemical reaction with x = 0.1–1.9.