Silicon (Si) has been considered a very promising anode material for lithium ion batteries due to its high theoretical capacity. However, high-capacity Si nanoparticles usually suffer from low electronic conductivity, large volume change, and severe aggregation problems during lithiation and delithiation. In this paper, a unique nanostructured anode with Si nanoparticles bonded and wrapped by graphene is synthesized by a one-step aerosol spraying of surface-modified Si nanoparticles and graphene oxide suspension. The functional groups on the surface of Si nanoparticles (50–100 nm) not only react with graphene oxide and bind Si nanoparticles to the graphene oxide shell, but also prevent Si nanoparticles from aggregation, thus contributing to a uniform Si suspension. A homogeneous graphene-encapsulated Si nanoparticle morphology forms during the aerosol spraying process. The open-ended graphene shell with defects allows fast electrochemical lithiation/delithiation, and the void space inside the graphene shell accompanied by its strong mechanical strength can effectively accommodate the volume expansion of Si upon lithiation. The graphene shell provides good electronic conductivity for Si nanoparticles and prevents them from aggregating during charge/discharge cycles. The functionalized Si encapsulated by graphene sample exhibits a capacity of 2250 mAh g−1 (based on the total mass of graphene and Si) at 0.1C and 1000 mAh g−1 at 10C, and retains 85% of its initial capacity even after 120 charge/discharge cycles. The exceptional performance of graphene-encapsulated Si anodes combined with the scalable and one-step aerosol synthesis technique makes this material very promising for lithium ion batteries.