Zirconia-treated natural graphite (C-Zx) anode and cobalt-substituted spinel (LiMn1.8Co0.2O4) cathode have previously been shown to have significant rate capability and cycle stability as half-cells in Li-ion batteries. We report attempts made to optimize the electrochemical performance of the Li-ion battery based on the above anode and cathode as a potential candidate for hybrid electric vehicles. A novel approach was taken to construct the full cell which is applicable to common Li-ion batteries, i.e., precycling of the graphite electrode at slower rate vs Li metal prior to assembling against LiMn1.8Co0.2O4. Precycling was found to be effective in delivering high steady capacity on subsequent cycling as a full cell. A Li-ion cell composed of precycled C-Zx as anode and LiMn1.8Co0.2O4 as cathode shows pronounced cycle stability and high rate capability. The high cycle stability of C-Zx anode was recognized as being due to the high stability of the surface film on graphite consisting of ZrO2. (c) 2005 The Electrochemical Society. All rights reserved.