The synthesis and characterization of core/shell-type Co3O4/C nanocapsules for application as anode material in lithium ion batteries are reported in this paper. The synthesis process involves the preparation of Co/C nanocapsules using a modified arc-discharge method and the annealing of the Co/C nanocapsules at 300°C for 2h in air. The as-synthesized products show a spherical shape and a core/shell-type structure in which a Co3O4 nanoparticle core of diameter 10–30nm is encapsulated by an onion-like carbon shell of thickness approximately 1nm. The Co/C nanocapsules can be stable below 130°C, and be oxidized above 205°C in air. The Co3O4/C nanocapsules deliver an initial discharge capacity of 1467.6mAhg−1 at 0.5C and maintain a high reversible capacity of 1026.9mAhg−1 after 50 charge–discharge cycles, much higher than the Co3O4 nanoparticles (471.5mAhg−1). A postmortem analysis of the Co3O4 and Co3O4/C anodes subjected to prolonged cycling reveals the existence of a lower degree of surface cracking and particle breakage in the Co3O4/C anode than the Co3O4 anode. The improved electrochemical performance and structural stability in the Co3O4/C nanocapsules are attributed to the enhanced electrical conductivity and structural buffering provided by the onion-like carbon shell.