In this letter, we study the stability of the domain model for lithium intercalated graphite in stages III and II by means of Density Functional Theory and Kinetic Lattice Monte Carlo simulations. We find that the domain model is either thermodynamically or kinetically stable when compared to the standard model in stages III and II. The existence of domains in the intercalation sequence is well supported by recent high resolution transmission electron microscope observations in lithiated graphite. Moreover, we predict that such domain staging sequences leads to a wide range of diffusivity as reported in experiments