The electronic, magnetic, and vibrational properties of Nb-doped LiCoO2 were studied theoretically via ab initio calculations using density functional theory. We find that the Nb-doping induced sizable mid-gap states due to the strong Nb 4d – O 2p hybridization, which results in the shrinking of the gap between the valence band maximum and the bottom of the conduction band in LixCo1-yNbyO2. Moreover, the oxidation state of Co ions becomes a mixture of Co3+ and Co2+ instead of purely Co3+ in pristine LiCoO2, which indicates the existence of non-zero magnetic moment in the Nb-doped systems. The mixed oxidation states of Co ions are further confirmed by the X-ray absorption spectra calculated for the main three edges, O K-edge, Co K-edge, and Co L-edge, which shows that the Co LIII – edge is shifted to lower energy in Nb-doped LiCoO2. To investigate the structural properties, we calculate phonon spectra for both pristine and doped cases. We find that while the phonon dispersion of LiCoO2 does not have negative-frequency modes, the Nb-doped LiCoO2 has phonon modes with negative frequencies that can be removed by applying Hubbard correction, indicating the importance of the electron correlation upon Nb doping. We argue that the Nb-doping induced modulation of electron correlation could be employed to engineer the electrical transport properties, making LixCo1-yNbyO2 an ideal candidate for memristor.