A nano-crystalline MgO coating was formed on the surface of LiCoO2 particle via a sol–gel method. MgO coating can improve the cycling stability of LiCoO2 significantly. After the 40th cycle a discharge capacity of more than 120mAh/g was remained for 1mol% MgO-coated LiCoO2, while only 13mAh/g for pristine LiCoO2 when both charged up to 4.7V. During heat treatment and charge/discharge process, Mg2+ in coatings will diffuse into LiO2-layers of LiCoO2, which does not cause any detectable shift in X-ray diffractometer (XRD) peak positions, but does impact the XRD peak intensity due to the aberrance of (003) plane. Mg2+ ions existing in LiO2-layers will stabilize the lattice structure of LiCoO2, hence improve the cycling performance of LiCoO2 cathode. More MgO coating on LiCoO2 is detrimental to the electrochemical properties of LiCoO2 cathode, probably due to the electrochemical inactivity of MgO particles.