Lithium-oxygen chemistry offers the highest energy density for a rechargeable system; such a system is known as a “lithium-air battery”. Most studies of lithium-air batteries have focused on demonstrating battery operations in an environment of pure oxygen; such a battery should technically be described as a “lithium-dioxygen (O₂) battery”. Consequently, the next step for the lithium-“air” battery is to understand how the reaction chemistry is affected by the constituents of ambient air. Among the components of air, CO₂ is of particular interest because its solubility in organic solvents is about fifty times higher than that of O₂, and it can react actively with O₂ ^{- ·}, which is the key intermediate species in Li-O₂ battery reactions. In this work, we investigated the reaction mechanisms in the Li-O₂/CO₂ cell under various electrolyte conditions using quantum mechanical simulations combined with experimental verification. Our most important finding is that the subtle balance among various reaction pathways influencing the potential energy surfaces can be modified by the electrolyte solvation effect. Thus, a low dielectric electrolyte tends to primarily form Li₂O₂, while a high dielectric electrolyte is effective in electrochemically activating CO₂, yielding only Li₂CO₃. Most surprisingly, we further discovered that a high dielectric medium such as DMSO can result in the reversible reaction of Li₂CO₃ within a Li-air cell (contrary to conventional belief) over multiple cycles. We believe that the current mechanistic understanding of the chemistry of CO₂ in a Li-air cell and the interplay of CO₂ with electrolyte solvation will provide an important guideline for developing Li-air batteries. Furthermore, the newly discovered possibility for a rechargeable Li-O₂/CO₂ battery based on Li₂CO₃ formation chemistry may have merits in enhancing cyclability by minimizing side reactions.