Lithium-ion battery is the most widely used battery currently, and its reliability and failure under various extreme working environments are therefore widely concerned. Among them, failures resulting from highly dynamic mechanical impacts are the most threatening and less covered by previous research. In this paper, with a specialized Machette hammer impact test system, the irreversible capacity loss of commercial cylindrical jelly-roll lithium-ion batteries under high dynamic mechanical impact was investigated, the influences of impact strength, impact number, and working temperature are also considered. Through microscopic characterization and finite element simulation, the failure mechanisms of anode, cathode, and separator are revealed, and their respective contributions to battery capacity loss are quantitatively analyzed. All these findings provide a theoretical basis for the redundancy design of batteries for missile electro-mechanical systems and other equipment which are subjected to high dynamic mechanical impact conditions.