A system and method for estimating internal parameters of a lithium-ion battery to provide a reliable battery state-of-charge estimate. The method uses a two RC-pair equivalent battery circuit model to estimate the battery parameters, including a battery open circuit voltage, an ohmic resistance, a double layer capacitance, a charge transfer resistance, a diffusion resistance and a diffusion capacitance. The method further uses the equivalent circuit model to provide a difference equation from which the battery parameters are adapted, and calculates the battery parameters from the difference equation.