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Batteries are the most widely used energy storage devices, and the lithium‐ion battery is the most heavily commercialized and most widely used battery type in the industry. However, the current rapid development of society requires a major advancement in battery materials to achieve high capacity, long life cycle, low cost, and reliable safety. Therefore, many new efficient energy storage materials and battery systems are being developed and explored, and their working mechanisms must be clearly understood before industrial application. In recent years, density functional theory (DFT) has been employed in the energy storage field and has made significant contributions to the understanding of electrochemical reaction mechanisms and to virtual screening of promising energy storage materials. In this review, the applications of DFT to battery materials are summarized and exemplified by some representative and up‐to‐date studies in the literature. The main focuses in this review include the following: 1) structural stability estimation by cohesive energy, formation energy, Gibbs free energy, and phonon dispersion spectra calculations; 2) the Gibbs free energy calculations for electrochemical reactions, corresponding open‐circuit voltage, and theoretical capacity predictions of batteries; 3) the analyses of molecule orbitals, band structures, density of states (DOS), and charge distribution of battery materials; 4) ion transport kinetics in battery materials; 5) simulations of adsorption processes. We conclude the review with the discussion of the assessments and validation of the popular functionals against several benchmarks, and a few suggestions have been given for the selection of density functionals for battery material systems.