Olivine LiFePO4 has been studied for more than a decade as a promising cathode material for rechargeable lithium batteries. However, the low electric conductivity and tap density still hinder its large-scale commercialization. Micro-sized LiFePO4 is prepared by an optimized hydrothermal method in this paper. The influence of postannealing on the physicochemical properties of LiFePO4 and FePO4 is investigated to understand the plausible mechanism for performance degradation. It is found that postannealing even chemical delithiation greatly affects the particle size, morphology, pore distribution, surface area, and probably the lattice strain of LixFePO4 (x = 0, 1). Consequently, the electrochemical performances of annealed materials are severely deteriorated because of the sluggish lithium diffusion, difficult electrolyte accessibility, and incomplete phase transition during charge/discharge. In addition, the "self-healing" process along with cycling is analyzed by in-situ synchrotron X-ray diffraction.