A layer structured V2O5·nH2O xerogel was synthesized via a simple green hydrothermal technique by dissolving commercial V2O5 powder in de-ionized water and hydrogen peroxide. Graphene–V2O5·nH2O xerogel composites were then prepared by mixing and filtration of as-prepared V2O5·nH2O xerogel and graphene in the desired ratio. The method is a cost effective and energy saving way to prepare nanostructured composites. Structure and morphology were investigated by X-ray diffraction, thermogravimetric analysis, field emission scanning electron microscopy, and transmission electron microscopy. Heat treatment at different temperatures could yield V2O5·nH2O xerogels with different amounts of crystal water, and the presence of graphene in the composites enhanced the thermal stability of V2O5·nH2O, in which the phase transformation moved towards higher temperature compared with the sample without graphene. The pristine V2O5·nH2O xerogel consisted of thin layers of ribbons with widths around 100 nm. In the composites, the V2O5·nH2O ribbons were located on the surface of the graphene sheets. Increasing the graphene content in the composites resulted in better cycling stability when the composites were tested as cathodes in different voltage ranges for lithium ion batteries. The initial and the 50th discharge capacities of the composite cathode with 17.8% graphene are 299 and 174 mAh g−1, respectively, when cycled between 1.5 and 4.0 V. The capacities decreased to 227 and 156 mAh g−1, respectively, when cycled between 2.0 and 4.0 V. The initial and the 50th discharge capacities of the composite with 39.6% graphene are 212 and 190 mAh g−1 in the voltage range of 1.5–4.0 V, and the capacities are 143 and 163 mAh g−1 when cycled between 2.0 and 4.0 V, respectively. The outstanding electrochemical performance could be attributed to the graphene induced unique structure and morphology.