Pristine Li-rich layered cathodes, such as Li(1.2)Ni(0.2)Mn(0.6)O(2) and Li(1.2)Ni(0.1)Mn(0.525)Co(0.175)O(2), were identified to exist in two different structures: LiMO(2)R3[overline]m and Li(2)MO(3)C2/m phases. Upon 300 cycles of charge/discharge, both phases gradually transform to the spinel structure. The transition from LiMO(2)R3[overline]m to spinel is accomplished through the migration of transition metal ions to the Li site without breaking down the lattice, leading to the formation of mosaic structured spinel grains within the parent particle. In contrast, transition from Li(2)MO(3)C2/m to spinel involves removal of Li(+) and O(2-), which produces large lattice strain and leads to the breakdown of the parent lattice. The newly formed spinel grains show random orientation within the same particle. Cracks and pores were also noticed within some layered nanoparticles after cycling, which is believed to be the consequence of the lattice breakdown and vacancy condensation upon removal of lithium ions. The AlF(3)-coating can partially relieve the spinel formation in the layered structure during cycling, resulting in a slower capacity decay. However, the AlF(3)-coating on the layered structure cannot ultimately stop the spinel formation. The observation of structure transition characteristics discussed in this paper provides direct explanation for the observed gradual capacity loss and poor rate performance of the layered composite. It also provides clues about how to improve the materials structure in order to improve electrochemical performance.