Lithium iron phosphate (LiFePO4) was synthesized from LiOH, FeSO4 and H3PO4 by a hydrothermal process at 180°C. The samples were characterized by X-ray diffraction, scanning electron microscopy and chemical analysis. Electrochemical performance of the samples was tested in terms of charge-discharge capacity and cycling behavior. The results indicated that Fe(III) impurity had obviously effect on the electrochemical properties of LiFePO4, and the formation of Fe3+ was caused by the oxidation of Fe2+ in the dissolving and feeding processes accompanying the increase of pH value. It was found that the precipitation separation was effective in decreasing the content of Fe3+ in the solution of FeSO4 and the sealed feeding was useful in preventing the conversion of Fe2+ to Fe3+. When the content of Fe3+ < 0.5 wt%, the hydrothermally synthesized LiFePO4 calcined at 750°C with sucrose as carbon source exhibited an initial discharge capacity of 154.9 mAh·g−1 at the rate of 0.1 C (1 C = 150 mA·g−1) and the cycling retention rate could reach 98% after 50 cycles at room temperature.