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This paper describes a high-power lithium-ion battery system that has been newly developed for application to hybrid electric vehicles (HEVs). The battery system was designed on the premise of an underfloor location so as to avoid sacrificing interior spaciousness while providing the power output and recharge performance required by the hybrid propulsion system. To meet these requirements, efforts were made to increase the specific power and to reduce the heat generation of the battery to previously unattained levels. As a result, exceptionally high specific power of 1,200 W/kg per cell, battery pack power of 25kW at 20% state of charge (SOC), and high charge/discharge efficiency of more than 95% in the urban driving schedule has been achieved. The battery pack is composed of two box-shaped modules designed with a low height in consideration of underfloor mountability.