Lithium ion (Li-ion) battery has emerged as an important power source for portable devices and electric vehicles due to its superiority over other energy storage technologies. A mild temperature variation as well as a proper operating temperature range are essential for a Li-ion battery to perform soundly and have a long service life. In this review paper, the heat generation and dissipation of Li-ion battery are firstly analyzed based on the energy conservation equations, followed by an examination of the hazardous effects of an above normal operating temperature. Then, advanced techniques in respect of electrode modification and systematic battery thermal management are inspected in detail as solutions in terms of reducing internal heat production and accelerating external heat dissipation, respectively. Specifically, variable parameters like electrode thickness and particle size of active material, along with optimization methods such as coating, doping, and adding conductive media are discussed in the electrode modification section, while the current development in air cooling, liquid cooling, heat pipe cooling, and phase change material cooling systems are reviewed in the thermal management part as different ways to improve the thermal performance of Li-ion batteries.