A new lithium iron oxide, LiFeO2, with a corrugated layer structure was synthesized by an ion exchange reaction between gamma-FeOOH and LIOH . H2O and its structure determined by x-ray and neutron diffraction measurements. The ion exchange reaction was carried out hydrothermally at 100 to 250 degrees C. Higher vapor pressures produce the disordered alpha-LiFeO2 phase, and higher reaction temperatures lead to a mixture of the disordered spinel phase, beta-LiFe5O8, and the new phase. Lithium cells consisting of LiFeO2 cathodes and lithium anodes showed good charge and discharge reversibility in the voltage range, 1.5 to 3.0 V. Furthermore, the lithium intercalation and deintercalation mechanism was characterized using x-ray diffraction results and electrochemical measurements.