A facile synthesis of Ag nanocrystals encapsulated in nitrogen-doped carbon fiber (NCF) is proposed, based on the simultaneous reaction between pyrrole and Ag+ ions in an aqueous solvent followed by a heat treatment. The as-prepared Ag/NCF demonstrated superior catalytic behavior toward ORR and OER. Besides improved cycling stability, a much lower discharge/charge gap of 0.89 V (vs Li/Li+) compared with 1.38 V for NCF cathode with a fixed capacity of 500 mAh g−1 was obtained in lithium oxygen batteries. The introduction of Ag crystals into NCF facilitates the oxygen reduction reaction/oxygen evolution reaction kinetics. X-ray diffraction analysis coupled with Raman spectroscopy confirmed that Ag/NCF cathode could reversibly catalyze Li2O2 formation and decomposition. The NCF matrix offers a conductive network to realize rapid mass transfer and the encapsulated Ag nanocrystals supplied effective catalytic active sites. The combined action between both contributes to the superior electrocatalytic performance.