Both silicon and tin have a high specific capacity (3600 mAh g−1 for Li15Si4 and 992 mAh g−1 for Li22Sn5 respectively) and are among the most attractive materials for potential negative electrodes in lithium ion batteries. However, mechanical degradation induced by the large volume expansion during the cycling has limited their practical application. In this work, we developed a new class of Si–Sn nanocomposites with unique phase-separated nanostructure, where the amorphous Si nanoparticles are thermodynamically precipitated out from Si–Sn alloy and embedded within the Sn matrix. The phase separation-induced nanostructure provides the capability to mitigate the mechanical degradation, by preventing the nucleation and propagation of microcracks during lithiation. The nanocomposite electrode exhibits relative high capacity (1400 mAh g−1) and excellent cycling stability with the optimum composition and nanostructure.