The accurate diagnostic of internal short circuit (ISC) is critical to the safety of lithium-ion battery (LIB), considering its consequence to disastrous thermal runaway. Motivated by this, this article proposes a novel ISC diagnostic method with a high robustness to measurement disturbances and the capacity fading. Particularly, a multistate-fusion ISC diagnostic method leveraging polarization dynamics instead of the conventional charge depletion is proposed within a model-switching framework. This is well-proven to eliminate the vulnerability of diagnostic to battery aging. Within this framework, the recursive total least squares method with variant forgetting is exploited, for the first time, to mitigate the adverse effect of measurement disturbances, which contributes to an unbiased estimation of the ISC resistance. The proposed method is validated both theoretically and experimentally for high diagnostic accuracy as well as the strong robustness to battery degradation and disturbance.