We investigate the energy-loss spectrum of bce Li through first-principles pseudopotential calculations. Using an N-point Pade approximant, we calculate the dielectric response function and produce the fine structure of the dynamic structure factor, in good agreement with available experimental data. The local-field and exchange-correlation effects are found to be significant in the particle-hole excitation region. The local-field effect gives rise to peaks in the energy-loss spectrum, which are associated with a plasmon-Fano resonance and zone-boundary collective states.