The structural evolution of fine powder prepared by a sol‐gel method upon heat‐treatment was investigated by using x‐ray diffraction. Electrochemical measurements showed that the reversible capacity of lithium ion reaction with the electrode could be as high as 600 mAh/g. The mechanism of lithium ion reaction was studied by ex situ x‐ray diffraction and Raman spectroscopy. Two processes were revealed: a substitution reaction, in which is reduced and Sn is formed, followed by alloy formation.