Nonstoichiometric layered LixMnyO2 compounds with the O3 structure (α-NaFeO2 type), space group R3̄m, were synthesized by ion exchange from the sodium precursors NaxMnyO2. Such lithium intercalation compounds are important in the context of rechargeable lithium batteries since they offer the key advantages of lower cost, lower toxicity, and higher safety when compared with LiCoO2, which is used presently as the positive electrode in these devices. By the varying of the synthesis conditions of the precursor and the ion-exchange process, significant variations of the vacancy content on the transition metal sites could be induced. The variations in composition and defect structure were reflected in differences in the lattice parameters and hkl dependent peak broadening, observed in the X-ray diffraction data. Structural details were confirmed by Rietveld refinement using neutron powder diffraction. Lithium intercalation/deintercalation proved very sensitive to the composition and defect structure. High discharge capacities of 190-200 mAhg-1 at a rate of C/7 (corresponding to complete discharge in 7 h) could be obtained with a capacity fade of only 0.12% per cycle, at room temperature. This is significantly better than results reported previously for stoichiometric LiMnO2. All of the materials described in this work convert to a spinel-like phase on repeated intercalation/deintercalation of lithium. Such conversion involves the generation of a nanostructured spinel-like phase within each particle. The nanostructure plays a key role in accommodating, at the domain wall boundaries, stresses which normally accompany the first-order Jahn-Teller driven phase transition occurring on cycling in the 3 V region.