Phospho-olivine LiFePO4 as a cathode material of rechargeable lithium battery was synthesized from LiOH, FeSO4, and (NH4)3PO4 by hydrothermal process at 170°C. The optimized molar ratio of Li:Fe:P in the starting solution was 2.5:1:1. The charge and discharge capacities at 3.5V versus Li/Li+ of hydrothermally synthesized LiFePO4 were 65mAhg−1. The additional heat treatment was carried out to improve the charge–discharge performance of hydrothermally synthesized LiFePO4. Raman spectroscopy revealed that existence of α-Fe2O3 on the particle surface of LiFePO4 annealed at 400°C. The charge and discharge capacities of the annealed LiFePO4 were 150mAhg−1. Two plateaus at 3.5 and 2.5V were observed in the charge–discharge curves, and the 2.5V plateau was correlated with the Li+ insertion into α-Fe2O3.