Li-rich cathode materials are potential candidates for next-generation Li-ion batteries. However, they exhibit a large voltage hysteresis on the first charge/discharge cycle, which involves a substantial (up to 1 V) loss of voltage and therefore energy density. For Na cathodes, for example Na0.75[Li0.25Mn0.75]O2, voltage hysteresis can be explained by the formation of molecular O2 trapped in voids within the particles. Here we show that this is also the case for Li1.2Ni0.13Co0.13Mn0.54O2. Resonant inelastic X-ray scattering and 17O magic angle spinning NMR spectroscopy show that molecular O2, rather than O22−, forms within the particles on the oxidation of O2− at 4.6 V versus Li+/Li on charge. These O2 molecules are reduced back to O2− on discharge, but at the lower voltage of 3.75 V, which explains the voltage hysteresis in Li-rich cathodes. 17O magic angle spinning NMR spectroscopy indicates a quantity of bulk O2 consistent with the O-redox charge capacity minus the small quantity of O2 loss from the surface. The implication is that O2, trapped in the bulk and lost from the surface, can explain O-redox.