Lithium ferrite, LiFe₅O₈ (LFO), has attracted great attention for various applications, and there has been extensive experimental studies on its material properties and applications. However, no systematic theoretical study has yet been reported, so understanding of its material properties at the atomic scale is still required. In this work, we present a comprehensive investigation into the structural, electronic, magnetic and thermodynamic properties of LFO using first-principles calculations. We demonstrate that the ordered α-phase with ferrimagnetic spin configuration is energetically favourable among various crystalline phases with different magnetic configurations. By applying the DFT + U approach with U = 4 eV, we reproduce the lattice constant, band gap energy, and total magnetization in good agreement with experiments, emphasizing the importance of considering strong correlation and spin-polarization effects originating from the 3d states of Fe atoms. We calculated the phonon dispersions of LFO with ferrimagnetic and non-magnetic states, and subsequently evaluated the Gibbs free energy differences between the two states, plotting the P–T diagram for thermodynamic stability of the ferrimagnetic against non-magnetic state. From the P–T diagram, the Curie temperature is found to be ∼925 K at the normal condition and gradually increase with increasing pressure. Our calculations explain the experimental observations for material properties of LFO, providing a comprehensive understanding of the underlying mechanism and useful guidance for enhancing performance of LFO-based devices.