  Intercalation of lithium atoms between layers of 2D materials can alter their
atomic and electronic structure. We investigate effects of Li intercalation in
twisted bilayers of the transition metal dichalcogenide MoS$_2$ through
first-principles calculations, tight-binding parameterization based on the
Wannier transformation, and analysis of moir\'e band structures through an
effective continuum model. The energetic stability of different intercalation
sites for Li between layers of MoS$_2$ are classified according to the local
coordination type and the number of vertically aligned Mo atoms, suggesting
that the Li atoms will cluster in certain regions of the moir\'e superlattice.
The proximity of a Li atom has a dramatic influence on the interlayer
interaction between sulfur atoms, deepening the moir\'e potential well and
leading to better isolation of the flat bands in the energy spectrum. These
results point to the usefulness for the use of chemical intercalation as a
powerful means for controlling moir\'e flat-band physics in 2D semiconductors.
