Increasing the efficiency and safety of battery management systems may require internal monitoring of lithium ion batteries. In this work, we present an analysis of the interaction between fiber-optic evanescent wave sensors (FOEWS) and graphite particles within a lithium ion battery over multiple cycles. Through slow charging and long rest periods, the FOEWS signal has shown sensitivity to lithium concentration at the surface of graphite particles by demonstrating a response to the slow diffusion of lithium ions within graphite particles during rest periods (i.e. relaxation of the electrode). The slope of the FOEWS signal during a full charge is found to exhibit three distinct peaks that occur within lithiated graphite's stage transitions zones IV, III and II. Deviation from the observed three peak trend correlates with significant battery capacity fade and thus indicate the sensors ability to detect capacity fade in real-time. During experiments, significant deviations in the slope during charging occurred at about ~5% SOC and minor disturbances to the slope were observed at ~80% SOC, which supports limiting the depth of charge and discharge to avoid accelerated capacity fade. These results deepen our understanding of the FOEWS's interaction with lithium ion batteries and supports the development of algorithms that optimize the control and monitoring of graphite lithiation with the aim of achieving safer operation as well as maximizing capacity and battery life.