Nanosized Prussian Blue, K0.88Fe2.04(CN)6·yH2O, prepared in aqueous solution at room temperature, is shown to be active as anode for lithium ion batteries after mild dehydration. It exhibits reversible capacities of up to 400 mAh g−1 at 8.75 mA g−1 and 150 mAh g−1 at 1750 mA g−1, with relatively low hysteresis and long cycle life in the low voltage range 0.005–1.6 V vs lithium. Ex-situ XRD, FTIR as well as SEM and TEM studies on pristine and cycled electrodes suggest that the reversible insertion of about ∼5 Li+/f.u. is associated with a displacement (or conversion) reaction on the Prussian Blue structure along with the reduction of all iron atoms, reported for the first time in this kind of systems. The products of re-oxidation do not recover the crystal structure of Prussian Blue.