Lithium titanate spinel (Li4Ti5O12; LTO) is a promising candidate for anodes in lithium-ion batteries due to its excellent cyclability and safety performance, and has been known as a 'zero-strain' material that allows reversible lithium insertion-deinsertion with little change in the lattice parameters. For a better understanding of lithium reaction mechanisms in this material, it has been of great interest to identify where lithium is inserted and how it migrates during charge and discharge, which is often difficult with x-ray and electron scattering techniques due to the low scattering power of lithium. In this study, we employed atomic-resolution annular bright-field imaging to directly image the lithium on interstitial sites in nanoscale LTO, and electron energy-loss spectroscopy to measure local lithium occupancy and electronic structure at different states of charge. During lithiation, charge compensation occurs primarily at O sites, rather than at Ti sites, and no significant change was found in the projected density of states (Ti 3d) until the voltage was lowered to ~50 mV or below. The Li K-edge spectra were simulated via ab initio calculations, providing a direct correlation between the near-edge fine structure and the local lithium coordination. During the initial states of discharge, lithium ions on 8a sites migrate to 16c sites (above 740 mV). Further lithiation causes the partial re-occupation of 8a sites, initially in the near-surface region at ~600 mV, and then in the bulk at lower voltages (~50 mV). We attribute the enhanced capacity in nanostructured LTO to extra storage of lithium in the near-surface region, primarily at {111} facets.