Pure olivine LiFePO4 and LiFePO4/C composite powders are synthesized by using mechanical alloying (MA) and subsequent firing. The powder properties and the electrochemical characteristics of the prepared samples are investigated in comparison with those of a sample obtained by the conventional solid-state reaction. The olivine LiFePO4 prepared by MA shows a maximum discharge capacity of 135mAhg−1 at the C/20 rate (8.5mAg−1) when fired at a relatively low temperature of 600°C. A LiFePO4/C composite compound prepared by the MA process under optimum firing conditions has a high capacity of 156mAhg−1 at the C/20 rate, i.e. 92% of the theoretical capacity. The composite also displays a better rate capability, a higher charge–discharge capacity and a more stable cycle-life than when produced by the conventional solid-state method. The improved electrode performance of MA samples originates mainly from very fine particles of sub-micron size and with a rough surface morphology. These powder characteristics increases the surface area of LiFePO4 particles and maximizes the contact area with the conductor additive, which results in enhanced electronic conductivity. Consequently, the MA technique offers a promising synthetic process to overcome the disadvantages of olivine-type LiFePO4 and LiFePO4/C composite cathode materials for rechargeable lithium batteries.