Background: Lithium-ion batteries are widely used in new energy vehicles and energy storage systems due to their superior performance. However, lithium batteries are prone to safety problems in the use process, so the fault diagnosis technology of lithium batteries has attracted more attention. Objective: This study aimed to ensure the safety of lithium batteries and accurately and timely diagnose the soft short circuit (soft SC) fault of lithium battery. Methods: Aiming at the energy storage lithium battery pack, this study proposed a soft short-circuit fault diagnosis method for the lithium-ion battery pack based on the improved Extended Kalman Filter (EKF) algorithm. First, the 1st-order RC equivalent circuit model of normal battery and soft SC fault battery was established, and model parameters were identified using Recursive Least Squares with Forgetting Factor (FFRLS). Then, using the improved EKF, the state of charge (SOC) of a single cell was estimated, and the difference between the calculated SOC and the estimated SOC by the coulomb counting method was used to detect soft SC faults and compared them with the reference data. Finally, the SC resistance value indicated the severity of the fault. Results: The proposed method could accurately diagnose the soft short circuit fault, and the error was found to be lower than the traditional EKF algorithm. The estimation error was about 0.4% for the battery with slight failure and about 1.5% for the battery with serious failure. Conclusion: The experimental results showed that the improved EKF algorithm could estimate the SOC difference more accurately, and the effect of soft SC fault diagnosis was better. At the same time, it could quantitatively identify the size of the short circuit resistance, which is very helpful for the subsequent management of the battery system.