An electrolyte system which consists of chloroethylene carbonate and propylene carbonate has been developed for lithium ion batteries containing a graphitic anode. The electrolyte decomposition during the first lithium intercalation into graphite in a propylene carbonate based electrolyte is significantly reduced in the presence of chloroethylene carbonate. Formation of a stable passivation film on the graphite surface is believed to be the reason for the improved cell performance.