Tin oxide is an attractive anode material for lithium battery, on the grounds of its high capacity (above 2000mAh/g), environmental friendliness and low cost. However, the large volumetric expansion (>200%) and aggregation of lithium-tin alloy cause significant capacity fading after only a few hundred cycles. In this work, we design a new type of SnO2 based composite electrode to address the above two issues. SnO2 nanoparticles uniform anchored on graphene are covered by a thin layer of silica. Upon cycling, tin can diffuse into the coating layer and also spread laterally on the graphene surface to form a continuous thin film of Li2SnxSiO3+y. Such design diminishes the volumetric expansion of individual Sn particles and aggregation of lithium-tin alloy, but also dramatically decreases the lithium transport distance and diffusion barrier. Additionally, we propose that diffusion-induced defects on surface offer capacitive-like regions to absorb extra lithium ions. As a result, this unique structure can maintain a high capacity of 1950mAh/g after 1000 cycles at a specific current of 500mA/g with negligible capacity loss, and excellent reversibility with a columbic efficiency retention over 99%.