Aqueous lithium-ion batteries (LIBs) have been highlighted as being applied for low-cost and safe energy storage. However, a conventional positive electrode used in LIBs, representatively layered LiCoO2 (LCO), has low compatibility with water. Reports on the interfacial reactions in aqueous LIBs are superficial, which means that finding suitable methods to improve cell stability is a challenge. In this study, we investigated the interfacial degradation of the LCO electrode using various pH conditions and surface and bulk X-ray spectroscopic analyses. We found that the insertion of protons (H+) into the LCO surface caused distortion of the local LCO structure and reduced lithiation efficiency, which significantly impacted the cell performance. In addition, the absence of a protective layer for LCO expedites capacity fading. We showed that a lithiated Nafion layer coating the LCO electrode provided both a hydrophobic matrix and an ion channel domain. This polymeric layer delayed capacity fading by limiting the movement of water, suggesting the need for a tolerant ion channel that controls water inflow.