Advanced electrochemical batteries are becoming an integral part of a wide range of applications from household and commercial to smart grid, transportation, and aerospace applications. Among different battery technologies, lithium-ion (Li-ion) batteries are growing more and more popular due to their high energy density, high galvanic potential, low self-discharge, low weight, and the fact that they have almost no memory effect. However, one of the main obstacles facing the widespread commercialization of Li-ion batteries is the design of reliable battery management systems (BMSs). An efficient BMS ensures electrical safety during operation, while increasing battery lifetime, capacity and thermal stability. Despite the need for extensive research in this field, the majority of research conducted on Li-ion battery packs and BMS are proprietary works conducted by manufacturers. The available literature, however, provides either general descriptions or detailed analysis of individual components of the battery system, and ignores addressing details of the overall system development. This paper addresses the development of an experimental research testbed for studying Li-ion batteries and their BMS design. The testbed can be configured in a variety of cell and pack architectures, allowing for a wide range of BMS monitoring, diagnostics, and control technologies to be tested and analyzed. General considerations that should be taken into account while designing Li-ion battery systems are reviewed and different technologies and challenges commonly encountered in Li-ion battery systems are investigated. This testbed facilitates future development of more practical and improved BMS technologies with the aim of increasing the safety, reliability, and efficiency of existing Li-ion battery systems. Experimental results of initial tests performed on the system are used to demonstrate some of the capabilities of the developed research testbed. To the authors’ knowledge, this is the first work that addresses, at the same time, the practical battery system development issues along with the theoretical and technological challenges from cell to pack level.