The reaction mechanism of lithium insertion into Mg2Si was studied using various analytic techniques including electrochemical measurements, X-ray diffraction (XRD), and Auger electron spectroscopy (AES). Electrochemical tests demonstrated that 1 mol Mg2Si reacted with 3.9 mol Li from which the initial capacity obtained was approximately 1370 mAh/g. Ex situ XRD and AES data showed that lithium intercalated into the Mg2Si lattice first followed by alloying with Si and Mg. The degradation mechanism of Mg2Si during cycling was investigated because the Mg2Si materials degraded rapidly within ten cycles. The electrode material disintegrated and Li remained within the active material after ten cycles. The XRD and scanning electron microscope data suggested that the degradation mechanism of Mg2Si was due to the volume change during the alloying/dealloying reaction, and the volume expansion/contraction made the Mg2Si electrode materials electrically isolated.