Li-rich Mn-based layered oxides (Li₂MnO₃, LMO) as cathodes with a high theoretical capacity have several disadvantages, such as low reversible capacity and cycle stability, for next-generation lithium-ion batteries (LIBs). In this study, we synthesize Fe-substituted LMO cathodes with various substitution concentrations using the Pechini sol–gel method and sintering. The interplanar distances and structural stabilities of the cathodes are investigated using X-ray diffraction and transmission electron microscopy. In particular, Fe substitution can suppress the release of oxygen from the LMO structure and promote the diffusion of Li-ions, thereby enhancing the structural stability, rate capability, and reversible capacity of LIBs, which is in agreement with the results obtained using density functional theory (DFT) calculations. The electrochemical and electrical properties of the Fe-substituted LMO cathodes are investigated via cycle and rate capability tests, the galvanostatic intermittent titration technique, electrochemical impedance spectroscopy, 4-point probe measurement, and DFT calculations. Among the Fe-substituted LMO cathodes, LMO with an optimal Fe element content demonstrates a high discharge capacity of 222 mA h g⁻¹ and high retention of 84.7% after 100 cycles because of its superior ionic and electrical conductivities.