Li-CO₂ batteries have attracted wide attentions due to their dual roles both in CO₂ capture and as sustainable energy storage devices. However, the electrochemistry of Li-CO₂ batteries, especially for all-solid-state (ASS) Li-CO₂ batteries, remains unclear due to the complicated electro-catalytic reactions. Here, we first reveal the reaction and failure mechanisms of ASS Li-CO₂ batteries using Ag nanowires (NWs) as the cathode catalyst. During discharge, the Ag NWs react with Li ions to in-situ form Li-Ag alloy, which facilitates the CO₂ reduction to generate LiAg₃O₂ nanoparticles dispersed uniformly in film-like Li₂CO₃ and amorphous carbon (a-C)_. During charge, Li₂CO₃ is decomposed to CO₂ under the catalysis of Ag. During both charge and discharge, the Ag NW surfaces are corroded and disintegrated into nanocrystalline Ag, LiAg₃O₂, and single-atom Ag, and the continuously accumulated a-C layer wraps up the broken Ag NWs, isolating the Ag NWs with CO₂ gas, thus shutting off the electrochemical reactions in the Li-CO₂ batteries. This study unveils the electrochemistry and failure mechanisms of ASS Li-CO₂ batteries, which provides a scientific basis for developing CO₂-based carbon fixation and renewable energy storage strategies.