We report an rGO/Fe2O3/SnO2 ternary nanocomposite synthesized via homogeneous precipitation of Fe2O3 nanoparticles onto graphene oxide (GO) followed by reduction of GO with SnCl2. The reduction mechanism of GO with SnCl2 and the effects of reduction temperature and time were examined. Accompanying the reduction of GO, particles of SnO2 were deposited on GO surface. In the graphene nanocomposite, Fe2O3 nanoparticles with a size of ~20 nm were uniformly dispersed surrounded by SnO2 nanoparticles, as demonstrated by transmission electron microscopy analysis. Due to the different lithium insertion/extraction potentials, the major role of SnO2 nanoparticles is to prevent aggregation of Fe2O3 during the cycling. Graphene can serve as a matrix for Li+ and electron transport, and is capable of relieving the stress that would otherwise accumulate in the Fe2O3 nanoparticles during Li uptake/release. In turn, the dispersion of nanoparticles on graphene can mitigate the restacking of graphene sheets. As a result, the electrochemical performance of rGO/Fe2O3/SnO2 ternary nanocomposite as an anode in Li-ion batteries is significantly improved, showing high initial discharge and charge capacities of 1179 and 746 mAhg-1, respectively. Importantly, nearly 100% discharge-charge efficiency is maintained during the subsequent 100 cycles with a specific capacity above 700 mAhg-1.