Voltage fade is a major problem in battery applications for high-energy lithium- and manganese-rich (LMR) layered materials. As a result of the complexity of the LMR structure, the voltage fade mechanism is not well understood. Here we conduct both in situ and ex situ studies on a typical LMR material (Li1.2Ni0.15Co0.1Mn0.55O2) during charge–discharge cycling, using multi-length-scale X-ray spectroscopic and three-dimensional electron microscopic imaging techniques. Through probing from the surface to the bulk, and from individual to whole ensembles of particles, we show that the average valence state of each type of transition metal cation is continuously reduced, which is attributed to oxygen release from the LMR material. Such reductions activate the lower-voltage Mn3+/Mn4+ and Co2+/Co3+ redox couples in addition to the original redox couples including Ni2+/Ni3+, Ni3+/Ni4+ and O2−/O−, directly leading to the voltage fade. We also show that the oxygen release causes microstructural defects such as the formation of large pores within particles, which also contributes to the voltage fade. Surface coating and modification methods are suggested to be effective in suppressing the voltage fade through reducing the oxygen release.