With the progressive development of new energy technologies, high-power lithium batteries have been widely used in ship power systems due to their high-power density and low environmental pollution, and they have gradually become one of their main propulsion energy sources. However, the large-scale deployment of lithium batteries has also brought a series of safety problems to ship operations, especially the battery internal short circuit (ISC). Battery ISC faults are very hidden and unpredictable at the initial stage and often fail to be detected in time, ultimately leading to overheating, fire or even an explosion of the ship’s power system. Based on this, this paper proposes a fast and accurate method for early-stage ISC fault location and detection of lithium batteries. Initially, voltage variations across the lithium battery packs are quantified using curvilinear Manhattan distances to pinpoint faulty battery units. Subsequently, the localized characteristics of voltage variance among adjacent batteries are leveraged to detect an early-stage ISC fault. Simulation results indicate that the proposed method can quickly and accurately locate the position of 5 Ω, 10 Ω and 15 Ω ISC faulty batteries within the battery pack, as well as detect the abnormal batteries in a timely manner with considerable sensitivity and reliability.