We report the reaction mechanisms of Li2.6Co0.4N anode material which we studied using chemical composition analysis, X-ray diffraction data for lithium extracted samples and core level electron energy loss spectroscopy. The only mobile ions in the Li2.6Co0.4N were lithium ions. The capacity depended on the amount of amorphous phase formed during the first lithium extraction. We found that the amorphous phase can accommodate a large quantity of lithium ions. By contrast, the nitrogen-K spectrum of electrochemically obtained Li1.0Co0.4N showed that there were a large number of holes in the nitrogen 2p orbital. It became clear that both cobalt and nitrogen play an important role in maintaining the charge balance. Based on these results, we propose a model of the reaction mechanism and electronic structure.