In order to ensure the using safety of lithium-ion batteries，an online battery condition monitoring method based on the Fading Extended Kalman Filter（FEKF） was proposed. A first-order equivalent circuit model of the lithium battery was established，the state parameters of the lithium battery were identified online using the recursive least squares method，and the state equation was established; the optimal dissipative factor was then introduced to construct the FEKF to obtain the terminal voltage residual，The terminal voltage residual sequence was used to construct the diagnostic function of χ2 distribution，and the error detection rate and the abnormal threshold of state parameters were then calculated by using the function. The experimental results showed that the residuals error generated by FEKF can alert abnormal conditions earlier，which proved that FEKF method method can significantly improve the accuracy of the χ2 test in terms of judging the abnormal internal abnormal state of lithium batteries.