Cobalt oxide is known to exhibit a large capacity as a negative electrode in lithium-ion batteries. Here, Co K-edge X-ray absorption spectroscopy (XAS) was used to investigate variations in the local structure during the first electrochemical cycle of the insertion-extraction of lithium into CoO. The XANES and EXAFS spectra in LiyCoO (y: lithium content) varied markedly with the lithium content. The initial insertion of lithium leads to the reduction of Co2+ in the pristine CoO to the reduced metallic Co0 state. The systematic variations observed in intensities of the peaks corresponding to the 1s f 3d and 1s f 4p transitions indicate that the mole ratio of Co to CoO increases gradually with the electrochemical insertion of lithium ions. Insertion of lithium causes the local structure around the Co atoms to become asymmetric. The systematic decrease in the magnitude of the Fourier transform (FT) with increasing amount of inserted lithium is closely related to an increase in static disorder due to the presence of two phases: Co0 clusters and CoO. The small-sized Co particles evolve gradually with a well-separated distribution in the Li2O matrix. In the successive extraction of lithium, the reduced Co particles return reversibly to the high-temperature cubic phase of CoO.