Layered LixMn1-yCoyO2 with the O3 (αNaFeO2) structure has been prepared from the analogous P3 sodium phase by ion exchange using LiBr in either ethanol at 80 °C or hexanol at 160 °C. The former preserves, to some extent, vacancies present on the transitional metal sites of the sodium phase, whereas the latter eliminates the vacancies. Materials with vacancies exhibit better performance as cathodes in rechargeable lithium batteries. The 2.5% Co doped material prepared in ethanol exhibits capacities of 200 mAhg-1 when cycled at C/8 between 2.4 and 4.6 V at 30 °C and with a fade of only 0.08% per cycle. A capacity of 180 mA h g-1 can be obtained at C/2 and 200 mAhg-1 at C rate and 55 °C. Importantly, this performance is obtained despite the fact that the materials convert to spinel-like phases on cycling. The spinel-like phases that form are nanostructured, with each crystallite being composed of a mosaic of nanodomains. The relief of strain at the domain wall boundaries accompanying the cubic-tetragonal phase transition may explain, at least in part, the facile cycling of these materials over a wide composition range (including the 3 V plateau) compared with high-temperature spinel which does not possess such nanodomains. Furthermore, vacancies present in the ethanol materials appear to migrate to the domain walls on cycling, rendering even more facile the Jahn-Teller-driven phase transformation on cycling these materials compared with those prepared in hexanol.