Understanding the structure and phase changes associated with conversion-type materials is key to optimizing their electrochemical performance in Li-ion batteries. For example, molybdenum disulfide (MoS2) offers a capacity up to 3-fold higher (∼1 Ah/g) than the currently used graphite anodes, but they suffer from limited Coulombic efficiency and capacity fading. The lack of insights into the structural dynamics induced by electrochemical conversion of MoS2 still hampers its implementation in high energy-density batteries. Here, by combining ab initio density-functional theory (DFT) simulation with electrochemical analysis, we found new sulfur-enriched intermediates that progressively insulate MoS2 electrodes and cause instability from the first discharge cycle. Because of this, the choice of conductive additives is critical for the battery performance. We investigate the mechanistic role of carbon additive by comparing equal loading of standard Super P carbon powder and carbon nanotubes (CNTs). The latter offer a nearly 2-fold increase in capacity and a 45% reduction in resistance along with Coulombic efficiency of over 90%. These insights into the phase changes during MoS2 conversion reactions and stabilization methods provide new solutions for implementing cost-effective metal sulfide electrodes, including Li–S systems in high energy-density batteries.