Lithium-ion battery systems employed in high power demanding systems such as electric vehicles require a sophisticated monitoring system to ensure safe and reliable operation. Three major states of the battery are of special interest and need to be constantly monitored. These include: battery state of charge (SoC), battery state of health (capacity fade determination, SoH), and state of function (power fade determination, SoF). The second paper concludes the series by presenting a multi-stage online parameter identification technique based on a weighted recursive least quadratic squares parameter estimator to determine the parameters of the proposed battery model from the first paper during operation. A novel mutation based algorithm is developed to determine the nonlinear current dependency of the charge-transfer resistance. The influence of diffusion is determined by an on-line identification technique and verified on several batteries at different operation conditions. This method guarantees a short response time and, together with its fully recursive structure, assures a long-term stable monitoring of the battery parameters. The relative dynamic voltage prediction error of the algorithm is reduced to 2%. The changes of parameters are used to determine the states of the battery. The algorithm is real-time capable and can be implemented on embedded systems.