A one dimensional model incorporating solvent diffusion and kinetics of solid electrolyte interphase (SEI) formation is developed to study capacity fade in lithium ion batteries. The model assumes that solvent diffuses through the SEI (solid electrolyte interphase) and undergoes a two electron reduction at the carbon SEI interface. The kinetics of the reduction reaction at the SEI–electrolyte interface and the solvent diffusivity are seen to be the most important parameters governing SEI formation. The capacity loss is seen to be a function of the thickness of the SEI layer and is seen to vary linearly over time. The rate constant governing SEI formation and solvent diffusivity are seen to follow Arrhenius type relationships. The model results are compared with and are found to be in good agreement with experimental data.