Carbon coating of silicon powder was studied as a means of preparation of silicon-based anode material for lithium ion batteries. Carbon-coated silicon has been investigated at various cycling modes vs. lithium metal. Ex situ X-ray data suggest that there is irreversible reduction of crystallinity of the silicon content. Since carbon layer preserving the integrity of the particle, the reversibility of the structural changes in the amorphous state Li–Si alloy provides the reversible capacity. The progressively decreased Coulomb efficiency with cycling indicates that more and more lithium ions are trapped in some form of Li–Si alloy and become unavailable for extraction. This is the main factor for the capacity fading during cycling. Qualitative studies of the impedance spectra of the electrode material at the first cycle for the fresh anode and at the last cycle after the anode capacity faded considerably and provide further support for this model of fading mechanism.