<p>The rapid development of the new energy automobile industry promotes the broad application of lithium-ion batteries (LIBs). Still, its high energy density and complex chemical characteristics also lead to frequent spontaneous combustion accidents, seriously threatening vehicle safety, the environment, and people’s lives. The leading cause of the spontaneous combustion of LIBs is thermal runaway. Its high-temperature persistence, secondary combustion risk, and toxic gas release have greatly challenged traditional fire extinguishing technologies (such as dry powder, foam, carbon dioxide, etc.). In recent years, hydrogel fire extinguishing technology (HFET) has become a research hotspot for solving the fire problem of LIBs because of its excellent cooling, heat insulation, and environmental protection performance. Hydrogels show high-efficiency fire extinguishing ability through comprehensive mechanisms such as endothermic cooling, oxygen isolation, and combustion inhibition, and show unique adaptability in LIB fires. This paper summarizes the causes and characteristics of spontaneous combustion of LIBs, analyzes the composition, mechanism, and application advantages of HFET in LIBs, and summarizes relevant experimental research and practical application cases at home and abroad. In addition, this paper discusses the potential of engineering applications of HFET in new energy vehicle battery packs, including preventive design and development of fire extinguishing devices. Finally, this paper analyzes the challenges of HFET regarding cost, adaptability, and standardization. It looks forward to future research directions, such as the research and development of new hydrogel materials, the synergistic application with other fire extinguishing technologies, and the design of intelligent fire extinguishing systems. The further development of HFET will provide critical support for the safety and sustainable development of the new energy automobile industry.</p>