Tin based alloys have attracted much attention as one of the promising anode materials because of their higher gravimetric/volumetric capacity and safer thermodynamic potential for next generation lithium-ion batteries. Ultrasmall Fe-Sn alloy with Cu additive (Fe-Sn-(Cu)) was synthesized using Sn nanoparticles as template by modified polyol method. Compared with Fe-Sn alloy, the cycling performance and rate capability were largely enhanced when Fe-Sn-(Cu) alloy was used as anode with the average loading weight of 1.5 mg/cm². It could deliver 465 mAh/g after 200 cycles at the C/2 rate, corresponding to an average capacity loss of only 0.08% per cycle. The calculated volumetric capacity was more than 1.5 times of commercial carbon. It also has exceptional rate capability, delivering 91.9%, 82.6%, 74.4%, 63.5% of the 0.1C capacity (557 mAh/g) at 0.2C, 0.5C, 1C and 2C, respectively. Fe-Sn-(Cu) alloy with higher capacity and enhanced cycling performance may become a potential candidate as anode in lithium-ion battery. This work is supported by the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE) program under Award No. DE-EE0006852.