Due to their high specific capacities beyond 250 mA h g⁻¹, lithium-rich oxides have been considered as promising cathodes for the next generation power batteries, bridging the capacity gap between traditional layered-oxide based lithium-ion batteries and future lithium metal batteries such as lithium sulfur and lithium air batteries. However, the practical application of Li-rich oxides has been hindered by formidable challenges. To address these challenges, the understanding of their electrochemical behaviors becomes critical and is expected to offer effective guidance for both materials and cell development. This review aims to provide fundamental insights into the reaction mechanisms, electrochemical challenges and modification strategies of lithium-rich oxides. We first summarize the research history, the pristine structures, and the classification of lithium-rich oxides. Then we review the critical reaction mechanisms that are closely related to their electrochemical features and performances, such as lattice oxygen oxidation, oxygen vacancy formation, transition-metal migration, layered to spinel transitions, ‘two-phase mechanism’, and lattice evolution. These discussions are coupled with state-of-the-art characterization techniques. As a comparison, the anionic redox reactions of layered sodium transition metal oxides are also discussed. Finally, after a brief overview of the correlation among the aforementioned mechanisms, we provide perspectives on the rational design of lithium-rich oxides with high energy densities and long-term cycling stability.