The mechanism of the tetragonal ↔ orthorhombic phase separation of Li-intercalated anatase TiO2 has previously been proposed to be a cooperative Jahn–Teller distortion due to occupation of low-lying Ti 3dxz,yz orbitals. Using density functional calculations, we show that the orthorhombic distortion of Li0.5TiO2 is not a purely electronic phenomenon and that intercalated Li plays a critical role. For a 2 × 1 × 1 expanded supercell for 0 ≤ x(Li) ≤ 1, the intercalation voltage is minimized for x(Li) = 0.5. The low-energy structures display a common structural motif of edge-sharing pairs of LiO6 octahedra, which allows all Li to adopt favorable oxygen coordination. Long-ranged disorder of these subunits explains the apparent random Li distribution seen in experimental diffraction data.