A vehicle can include a traction battery and a controller in communication with the battery to determine the battery state using sensed battery electrode capacity to account for battery aging. The sensed battery electrode capacity can be dependent on active lithium ions at a positive electrode of the traction battery. The controller can compare a battery voltage model to measured battery voltage during a vehicle drive cycle, receive sensed current throughput data and open circuit voltage at the battery, and determine if a deviation threshold is exceeded. The controller can also correct electrode capacity using a mean of the measured open-circuit voltage to correct the capacity error to less than one amp-hour or initiate an active lithium capacity correction using a variance of the current throughput to correct the capacity error to less than one amp-hour. This information can be used to control the vehicle and battery usage.