In order to obtain an in-depth insight into the mechanism of charge compensation and capacity fading in LiCoO2, the evolution of electronic structure of LiCoO2 at different cutoff voltages and after different cycles are studied by soft x-ray absorption spectroscopy in total electron (TEY) and fl uorescence (TFY) detection modes, which provide surface and bulk information, respectively. The spectra of Co L2,3-edge indicate that Co contributes to charge compensation below 4.4 V. Combining with the spectra of O K-edge, it manifests that only O contributes to electron compensation above 4.4 V with the formation of local O 2p holes both on the surface and in the bulk, where the surficial O evolves more remarkably. The evolution of the O 2p holes gives an explanation to the origin of O?2 or even O2. A comparison between the TEY and TFY of O K-edge spectra of LiCoO2 cycled in a range from 3 V to 4.6 V indicates both the structural change in the bulk and aggregation of lithium salts on the electrode surface are responsible for the capacity fading. However, the latter is found to play a more important role after many cycles.