Voltage fading is a major problem in battery applications for high-energy Lithium- and Manganese-rich (LMR) layered materials. Because of the complexity in the LMR structure, the voltage fade mechanism is not well understood. Here we conduct both in situ and ex situ studies on a typical LMR material (Li_1.2Ni_0.15Co_0.1Mn_0.55O₂) during charge-discharge cycling, using multi-length-scale X-ray spectroscopic and 3D electron microscopic imaging techniques. Through probing from surface to bulk, from individual to the whole ensembles of particles, we show that the average valence states of each type of transition metal cations are continuously reduced, which is attributed to the oxygen release from LMR. Such reductions activate the new lower voltage Mn³⁺/Mn⁴⁺ and Co²⁺/Co³⁺ redox couples in addition to the original ones like Ni²⁺/Ni³⁺, Ni³⁺/Ni⁴⁺, and O^2-/O^-, directly leading to the voltage fade. We also show that the oxygen release causes microstructural defects such as the formation of large pores within particles which also contributes to the voltage fading. The surface coating and modifications are suggested to be effective in suppressing the voltage fade through reducing the oxygen release.