Micro-short circuit (MSC) is a latent risk in power batteries, which may give rise to thermal runaway and even catastrophic safety hazards. The motivation of this study is to quantitatively analyze MSC in an initial stage, particularly for lithium-ion batteries. To verify the feasibility of the proposed method, an equivalent MSC experiment is carried out. Based on a cell difference model (CDM), the cell SOC differences with the mean SOC for a battery pack are estimated by extended Kalman filter (EKF). The evaluated SOC difference can track the actual value well. Furthermore, a MSC diagnostic method is developed by employing recursive least squares (RLS) filter. The method is demonstrated to examine the short circuit resistance accurately. The results also show that the proposed method requires low computational load for the SOC difference and short circuit resistance diagnosis.