Interfacial debonding is one of the reasons for capacity fade and impedance increase in Li-ion batteries. In this study, the debonding behavior of the active particle from the binder was investigated during the progress of lithiation/delithiation. Using the cohesive zone model, the progressive interfacial debonding was simulated by two-way coupling of the lithium diffusion and mechanical damage. The role of the interfacial traction forces and relative displacements were analyzed in the damage development and debonding propagation. The effect of the interfacial fracture was investigated on the evolution of state of charges and stresses within the particle and binder. The simulations revealed that debonding starts from the edge of the interface; and once it happens, rapidly propagates toward the inner region of the interface. The interface debonding enhanced the extent of the average state of charges due to the additional ionic flux through the newly created surfaces. The developed model can be extended to study the performance change due to the mechanical failure in Li-ion batteries by implementation in the cell-scale model. In addition, understanding the fundamental mechanisms of interfacial debonding will help engineers design more robust electrodes with better mechanical integrity.