In this paper a new battery thermal management system (BTMS) is proposed, where an internal cooling channel carrying water through the battery cells is integrated to a cell. A two-dimensional (2-D) thermal model is developed and validated against experimental data from literature for a 53 A h lithium-ion battery (LIB) cell. The model is then adapted to reflect the installation of an internal cooling channel. The influence of different parameters such as the channel size, the channel location, and the inlet flow velocity on the thermal performance of the LIB cell is investigated. The results show that using optimal channel size with combination of best channel location as well as inlet velocity reduces the peak temperature by 26% and 20% for 3 C and 5 C discharge rates, respectively. Consequently, the average cell temperature is reduced by 24% for a 3 C discharge rate, and 15% for a 5 C discharge rate.