To increase the volumetric discharge capacity of negative electrode for rechargeable lithium batteries, a new intermetallic compound including rare earth element, CeSn3, was synthesized by mechanical alloying (MA), and the performance of the electrode was investigated. The CeSn3 electrode was found to have a volumetric discharge capacity of over 2000mAhcm−3 based on the theoretical volume of CeSn3, which is three times larger than that of graphite electrode. The electrochemical reaction of the CeSn3 electrode with Li may not obey the well-known mechanism of Li x Sn formation in the other tin-based electrodes because of lower potential plateaus in comparison with those of pure tin electrode. Although the CeSn3 electrode exhibited very poor cycle life, performance could be improved significantly if the CeSn3 was reacted with lithium using MA in advance. The resulting Li3.8CeSn3 electrode showed an excellent performance not only on the cyclability, but also on the reversibility at the first cycle.