LiNi0.5Mn1.5O4 was synthesized by sol–gel using polyvinylpyrrolidone (PVP) as dispersant and ethylene glycol (EG) as size-controlled additive. Crystal structure, particle morphology and electrochemical performance of the resulting product (PVP–LNMO) as cathode of lithium ion battery were investigated with XRD, SEM, CV, EIS, and charge/discharge test, with a comparison of LiNi0.5Mn1.5O4 (LNMO) synthesized under the same conditions but without using PVP and EG. It is found that PVP–LNMO is composed of dispersed LiNi0.5Mn1.5O4 nanoparticles with uniform size, and exhibits far better rate capability and cyclic stability than LNMO. The particles of the latter are in micro size due to the aggregation of smaller primary particles. PVP–LNMO delivers a reversible discharge capacity of 96 mAh g−1 at 20C rate with a capacity retention of 93% at 5C rate after 500 cycles, while only 40 mAh g−1 and 53% for LNMO, respectively. The nanoparticles provide shorter distance for electron and lithium ion transport and larger surface area for electron exchange on the electrode/electrolyte interface, resulting in the far better rate capability of PVP–LNMO than LNMO, while the room among nanoparticles in PVP–LNMO releases the stress of Jahn–Teller distortion that causes destruction of LNMO microparticles, resulting in the excellent cyclic stability.