A hydrothermal synthesis route was used to synthesize iron(III) phosphate hydroxide hydrate–carbon nanotube composites. Carbon nanotubes (CNT) were mixed in solution with Fe1.19(PO4)(OH)0.57(H2O)0.43 (FPHH) precursors for one-pot hydrothermal reaction leading to the FPHH/CNT composite. This produces a highly electronic conductive material to be used as a cathode material for Li-ion battery. The galvanostatic cycling analysis shows that the material delivers a specific capacity of 160 mAh g–1 at 0.2 C (0.2 Li per fu in 1 h), slightly decreasing with increasing current density. A high charge–discharge cyclability is observed, showing that a capacity of 120 mAh g–1 at 1 C is maintained after 500 cycles. This may be attributed to the microspherical morphology of the particles and electronic percolation due to CNT but also to the unusual insertion mechanism resulting from the peculiar structure of FPHH formed by chains of partially occupied FeO6 octahedra connected by PO4 tetrahedra. The mechanism of the first discharge–charge cycle was investigated by combining operando X-ray diffraction and 57Fe Mössbauer spectroscopy. FPHH undergoes a monophasic reaction with up to 10% volume changes based on the Fe3+/Fe2+ redox process. However, the variations of the FPHH lattice parameters and the 57Fe quadrupole splitting distributions during the Li insertion–deinsertion process show a two-step behavior. We propose that such mechanism could be due to the existence of different types of vacant sites in FPHH, including vacant “octahedral” sites (Fe vacancies) that improve diffusion of Li by connecting the one-dimensional channels.