The thin films of nanostructured In2O3 have been prepared by reactive pulsed laser deposition (PLD) method in oxygen ambient. The electrochemical properties have been investigated by charge/discharge measurement and cyclic voltammograms. A large reversible capacity of nanostructured In2O3 thin films was found to be 883mAhg−1, corresponding to 8.9 Li per In2O3. A new couple of reduction and oxidation peaks at 1.0 and 1.9V were observed from CV curves for the first time. The electrochemical reaction properties of In2O3 with lithium were examined by X-ray diffraction (XRD), high resolution transmission electron microscopy (HRTEM) and selected area electron diffraction (SAED) measurements. Both alloying/dealloying processes and oxidation/reduction processes of In were revealed during the lithium electrochemical reaction of In2O3 thin film electrode instead of the classical alloying reaction between In2O3 and lithium.