Silicon-based anodes are an appealing alternative to graphite for lithium-ion batteries because of their extremely high capacity. However, poor cycling stability and slow kinetics continue to limit the widespread use of silicon in commercial batteries. Performance improvement has been often demonstrated in nanostructured silicon electrodes, but the reaction mechanisms involved in the electrochemical lithiation of nanoscale silicon are not well understood. Here, in-situ synchrotron X-ray diffraction is used to monitor the subtle structural changes occurring in Si nanoparticles in a Si-C composite electrode during lithiation. Local analysis by electron energy-loss spectroscopy and transmission electron microscopy is performed to interrogate the nanoscale morphological changes and phase evolution of Si particles at different depths of discharge. It is shown that upon lithiation, Si nanoparticles behave quite differently than their micrometer-sized counterparts. Although both undergo an electrochemical amorphization, the micrometer-sized silicon exhibits a linear transformation during lithiation, while a two-step process occurs in the nanoscale Si. In the first half of the discharge, lithium reacts with surfaces, grain boundaries and planar defects. As the reaction proceeds and the cell voltage drops, lithium consumes the crystalline core transforming it into amorphous LixSi with a primary particle size of just a few nanometers. Unlike the bulk silicon electrode, no Li15Si4 or other crystalline LixSi phases were formed in nanoscale Si at the fully-lithiated state.