Nanosized carbon-coated lithium iron phosphate (LiFePO4/C) particles were synthesized using a novel low-cost colloidal process with LiH2PO4, FeCl2 and anhydrous N-methylimidazole (NMI) as starting materials, following by a short annealing step at 600 °C. The ∼3–5 nm thick carbon coating comes from the carbonization of molten salt NMIH+Cl− derived from NMI; the resulting carbon contents of the LiFePO4/C powder is 2.53 wt.%. The materials were characterized by thermogravimetric and differential thermal analysis, differential scanning calorimetry, powder X-ray diffraction, field-emission scanning electron microscopy, transmission electron microscopy, atomic absorption spectroscopy, Raman spectroscopy, four-point probe method, cyclic voltammetry and galvanostatic cycling experiments in coin cells. The LiFePO4 phase reveals agglomeration of semi-spherically particles with an average individual size of 35 ± 4 nm. Carbon-coated LiFePO4 posseses electronic conductivity of 1.4 × 10−3 S cm−1 at room temperature causing a markable increase in rate capability. Cycling the cells between 2.2 and 4.2 V vs. Li+/Li resulted in a discharge capacity of 164 mAh g−1 at the first cycle of C/20 and 162 mA hg−1 after 35 cycles, which corresponds to over 95% of the theoretical capacity of olivine LiFePO4.