Iron Bismuth Oxychloride nanosheets were successfully synthesized by facile hydrolysis method. The X-ray photoelectron spectroscopy (XPS) shows composition was uniformly controlled as Fe_0.3Bi_0.7OCl. UV-Vis spectra and cyclic voltammetry (CV) results show the band gap of nanosheets correspondingly decreased from 3.4 eV for BiOCl to 2.08 eV for Fe_0.3Bi_0.7OCl due to raising of the valence band edge. Activation energy for electrical conductivity reduced from 862 meV to 796 meV for BiOCl and Fe_0.3Bi_0.7OCl, respectively. Density functional theory calculations predict changes to the valence band and decrease in the Fermi level toward the valence band edge for the Fe_0.3Bi_0.7OCl nanosheets - in accordance with experimental data. Correspondingly the Li ion capacities increased from 215 mAh/g for BiOCl to 542 mAh/g for Fe_0.3Bi_0.7OCl after 50 cycles at the current density of 100 mA/g.