The critical challenge for the user acceptance of electric vehicles is the simultaneous improvement of the driving range and fast charging capabilities, which are related to the energy and power density of the storage device. Lithium‐ion batteries (LIBs) are currently the most promising candidate to push electric vehicles toward the mass market. However, they suffer from a tradeoff between energy and power density, forbidding arbitrary combinations of high storage capacity and fast charging capability. Herein, a simple electrochemical principle describing the intrinsic limits of LIBs is reported. It is deduced that the tradeoff between energy and power density originates from diffusion limitations in the electrolyte. The electrochemical approach of diffusion‐limited current density is adapted to porous Li‐ion insertion electrodes, resulting in the “diffusion‐limited C‐rate” (DLC). The theoretical considerations are in excellent agreement with experimentally observed rate limitations of a large number of electrodes with different active materials and varying design parameters. While the C‐rate drawn from an LIB cannot be higher than the DLC without significant capacity decline, parameter variations that improve the DLC reduce the nominal specific capacity. This relationship makes the DLC a fundamental quantity revealing the most expedient optimization approaches and promising directions for future battery research and development.