Nanocomposites of V2O5 xerogel and polypyrrole (Ppy) were prepared from a vanadyl tris(isopropoxide) precursor and pyrrole monomer by in situ oxidative polymerization of the pyrrole in the sol stage followed by gelation. Unlike previous sol-gel nanocomposite synthetic routes, the gel forms a stable solution from which thin homogeneous films can be cast. The nanocomposite was characterized by XRD, FTIR and electrochemical measurements. Three different thin film types with different spatial arrangements were used to characterize the compensation of charge. X-ray diffraction reveals that the Ppy chains are intercalated within the interlayer region of the V2O5, leading to an increase in the d-spacing from 11.85 Å for V2O5 to 13.8 Å for the nanocomposite. Electrogravimetric results showed that electroneutrality during charging and discharging is achieved predominantly by Li+ transport. EQCM studies of a bilayer film arrangement with the nanocomposite cast over an electropolymerized film of Ppy revealed that the nanocomposite is an effective barrier for anion transport. The nanocomposite showed a higher specific capacity (283 A h kg−1) than that of V2O5 (236 A h kg−1). This result was attributed to differences in structure between the two materials. The galvanostatic intermittent titration technique (GITT) was used to obtain the diffusion coefficients of Li+ in the nanocomposite and the V2O5 xerogel. These values range from 2×10−11 to 3×10−13 cm2 s−1, decreasing as the amount of intercalated Li+ is increased. For V2O5 the Li+ diffusion coefficient ranged from 1×10−12 to 8×10−14 cm2 s−1, also decreasing as the amount of intercalated Li+ increased. In situ resistance measurements revealed a very high conductivity over the potential range of 0.4 to −0.7 V (vs. Ag/AgNO3) for the nanocomposite, more than a factor of five larger than that for V2O5.