Lithium-rich layered oxide, expressed as xLi2MnO3-(1-x) LiMO2 (M = Ni, Co, Mn, etc.), exhibits a high discharge capacity of 200 mAh/g or more and a high discharge voltage at a charge of 4.5 V or more. Some existing reports on cathode materials state that lithium-rich layered oxide is currently the most promising candidate as an active material for high-energy-density lithium-ion cells, but there are few reports on the degradation mechanism. Therefore, this study created a prototype cell using a lithium-rich layered cathode and a graphite anode, and analyzed the degradation mechanism due to charge and discharge. In order to investigate the causes of degradation, changes in the bulk structure and surface structure of the active material were analyzed using high-resolution X-ray diffraction (HRXRD), a transmission electron microscope (TEM), X-ray absorption fine structure (XAFS), and scanning electron microscope/energy dispersive X-ray spectroscopy (SEM-EDX). The results showed that dissolution of transition metals from the cathode active material is the main factor producing degradation of the full cell capacity, and that this is promoted by excessive reductive decomposition of the electrolyte due to deposition of the transition metals on the anode. In addition, voltage fade originates in the cathode active material, and is promoted by changes in the local structure resulting from oxygen release from the crystals due to charge and discharge.