A disordered rocksalt Li-excess cathode material, Li$_{1.25}$Nb$_{0.25}$Mn$_{0.5}$O$_2$, was synthesized and investigated. It shows a large initial discharge capacity of 287 mAh/g in the first cycle, which is much higher than the theoretical capacity of 146 mAh/g based on the Mn$^{3+}$/Mn$^{4+}$ redox reaction. In situ X-ray diffraction (XRD) demonstrates that the compound remains cation-disordered during the first cycle. Electron energy loss spectroscopy (EELS) suggests that Mn and O are likely to both be redox active, resulting in the large reversible capacity. Our results show that Li$_{1.25}$Nb$_{0.25}$Mn$_{0.5}$O$_2$ is a promising cathode material for high capacity Li-ion batteries and that reversible oxygen redox in the bulk may be a viable way forward to increase the energy density of lithium-ion batteries.