Effective thermal management is a cornerstone of safe, long-life lithium-ion battery operation, especially under high-rate charge–discharge and dynamic driving conditions. Conventional active cooling technologies face inherent trade-offs between heat dissipation efficiency, system complexity, and temperature uniformity, while phase change materials (PCMs) provide a promising passive alternative by absorbing latent heat during phase transition to buffer temperature spikes, improve temperature uniformity, and delay thermal runaway propagation. This paper presents a comprehensive review of recent advances in PCM-based lithium-ion battery thermal management, systematically covering the full scope from fundamental battery heat generation mechanisms to material synthesis optimization and hybrid system integration. At the material level, we analyze state-of-the-art strategies to address the intrinsic drawbacks of organic PCMs—low thermal conductivity, mismatched phase transition temperatures, and high flammability—including the construction of carbon/metal conductive skeletons, compositional tuning of phase change behavior, and flame-retardant modifications. These approaches have yielded composite PCMs with significantly improved heat transport capability and fire safety, while preserving high latent heat storage capacity. At the system level, we evaluate the thermal performance of pure passive PCM configurations, which excel at peak temperature suppression and inter-cell temperature uniformity, as well as hybrid designs that combine PCMs with air or liquid cooling to resolve heat accumulation issues and maintain stable performance under prolonged, demanding operating cycles. Despite these advances, key challenges remain: balancing high thermal conductivity with high latent heat capacity, developing climate-adaptable phase transition temperatures, and integrating multiple functionalities without compromising core thermal storage properties. Looking forward, future research directions include multifunctional integrated composites, smart adaptive PCMs, cost-effective scalable manufacturing, and precision structural engineering. This review also summarizes quantified performance trade-offs and provides actionable design guidelines for both material development and system-level integration.