Lithium manganese oxide nanopowders doped with Ce ions are synthesized using modified sol-gel method and the effect of annealing atmosphere (air vs. nitrogen) on the structure, morphology, and phase composition is studied thoroughly. Electrochemical testing is conducted to evaluate the effect of annealing atmosphere on electrochemical performance. The X-ray diffraction indicates the cubic spinel structure for all the obtained samples. The lattice parameter is observed to slightly decrease with increasing concentration of Ce3+ ions substituting Mn3+ ions from 8.230 to 8.228 Ẵ and from 8.227 to 8.224 Ẵ for air annealing and for nitrogen-air annealing, respectively. A limited solubility of cerium in LiMn2O4 is also observed, as small amounts of cerium dioxide is detected on the surface of LiMn2-xCexO4 grains and confirmed by XPS analysis of cerium which shows only the spectrum of Ce4+ ions. Electrochemical testing is conducted to evaluate the effect of annealing atmosphere on electrochemical performance. It is shown that annealing in nitrogen and then in air results in excellent capacity retention with minimal, 4–8% capacity loss after 150 cycles. LiMn1.99Ce0.01O4 samples prepared that way display better high rate performance in comparison with pristine LiMn2O4.