The exploration of anode materials that can store large-sized K-ion to solve the poor kinetics and large volume expansion issues has become the key scientific bottlenecks hindering the development of potassium-ion batteries (PIBs). Herein, ultrafine CoTe2 quantum rods physiochemically encapsulated by graphene and nitrogen-doped carbon (CoTe2@rGO@NC) are regarded as anode electrodes for PIBs. Dual physicochemical confinement and quantum size effect not only enhance electrochemical kinetics but also restrain large lattice stress during repeated K-ion insertion/extraction process. Superior electronic conductivity, K-ion adsorption, and diffusion ability can be acquired for CoTe2@rGO@NC, confirmed through first-principles calculations and kinetics study. K-ion insertion/extraction proceeds via a typical conversion mechanism relying on Co as the redox site, where the robust chemical bond of COCo plays an important role in maintaining the electrode stability. Accordingly, CoTe2@rGO@NC contributes a high initial capacity of 237.6 mAh·g−1 at 200 mA·g−1, a long lifetime over 500 cycles with low-capacity decay of 0.10% per cycle. This research will lay the materials science foundation for the construction of quantum-rod electrodes.