Energy-storing electrochemical batteries are the most critical components of high energy density storage systems for stationary and mobile applications. Lithium-ion batteries have received considerable interest for hybrid electric vehicles (HEV) because of their high specific energy, but face inherent thermal management challenges that have not been adequately addressed. In the present investigation, a fully coupled electrochemical and thermal model for lithium-ion batteries is developed to investigate the impact of different thermal management strategies on battery performance. This work represents the first ever study of these coupled electrochemical-thermal phenomena in batteries from the electrochemical heat generation all the way to the dynamic heat removal in actual HEV drive cycles. In contrast to previous modeling efforts focused either exclusively on particle electrochemistry on the one hand or overall vehicle simulations on the other, the present work predicts local electrochemical reaction rates using temperature-dependent data on commercially available batteries designed for high rates (C/LiFePO4) in a computationally efficient manner. Simulation results show that conventional external cooling systems for these batteries, which have a low composite thermal conductivity (~1 W/m-K), cause either large temperature rises or internal temperature gradients. Thus, a novel, passive internal cooling system that uses heat removal through liquid-vapor phase change is developed. Although there have been prior investigations of phase change at the microscales, fluid flow at the conditions expected here is not well understood. A first-principles based cooling system performance model is developed and validated experimentally, and is integrated into the coupled electrochemical-thermal model for assessment of performance improvement relative to conventional thermal management strategies. The proposed cooling system passively removes heat almost isothermally with negligible thermal resistances between the heat source and cooling fluid. Thus, the minimization of peak temperatures and gradients within batteries allow increased power and energy densities unencumbered by thermal limitations.