LiNi0.5Mn0.3Co0.2O2 cathode materials synthesized via conventional one-step and two-step calcination strategies suffer from high contents of surface impurities and structural defects (i.e., Ni2+/Li+ cation mixing and oxygen vacancy), resulting in suboptimal electrochemical performance. In the present study, the formation of Li2O during calcination is found to be detrimental and responsible for the low quality of LiNi0.5Mn0.3Co0.2O2. Thus, a three-step calcination strategy is devised to significantly reduce surface impurities and structural defects through strategically suppressing Li2O formation. The calcination strategy involves first melting of Li precursor, then reaction and conversion of Li precursor with Ni0.5Mn0.3Co0.2(OH)2 to form LiNi0.5Mn0.3Co0.2O2 without Li2O generation, and finally formation of a layered structure. The as-prepared LiNi0.5Mn0.3Co0.2O2 possesses smooth morphology, much reduced surface impurities, Ni2+/Li+ cation mixing, and oxygen vacancy. The corresponding Ni2+ occupancy at Li sites and oxygen vacancy are only 2.2% and 1.7%, respectively. The as-prepared LiNi0.5Mn0.3Co0.2O2 also exhibits high capacity (178.8 mAh g−1 at 0.1 C), good cycle performance (83.4% capacity retention at 100th cycle), and excellent rate capability (97.4 mAh g−1 at 5 C). This calcination strategy is applicable to LiOH·H2O, LiNO3 and Li2CO3 as Li precursors. The underlying mechanism of this three-step calcination strategy is elucidated.