Ultrafine carbon-coated SnO2 nanoparticles (NPs) with diameters of 3–6 nm are prepared by a hydrothermal method in the presence of ascorbic acid and subsequent thermal treatment. The ascorbic acid, on the one hand, serves as a ligand to control the growth of the ultrafine SnO2 NPs during the hydrothermal process and on the other hand it acts as carbon precursor to form carbon shell surrounding the ultrafine SnO2 NPs in the thermal treatment process. When evaluated as an anode material for lithium-ion batteries (LIBs), the as-synthesized ultrafine carbon-coated SnO2 NPs exhibit a high reversible capacity of 688.6 mAh g−1 at a rate of 1 C after 50 cycles. Even charging at the rate of as high as 5 C, they still deliver a reversible capacity of 414 mAh g−1, which is about 50% of the theoretical capacity of SnO2. The perfect electrochemical performance can be ascribed to the synergic effects of the conductive carbon shell surrounding the SnO2 NPs and the ultra-small size of the SnO2 NPs.