In the present study, the mechanical properties of a dry-processed polyethylene (PE) separator are investigated in terms of deformation and failure limits. The focus is set on the anisotropic mechanical behavior of this material. A deeper understanding of the damage mechanism is important for further safety and crashworthiness investigations and predictions of damage before failure. It has been found that separator integrity is one of the crucial parts in preventing internal short circuit and thermal runaway in lithium-ion (Li-ion) batteries. Based on uniaxial tensile tests with local strain measurement, a novel failure criterion for finite element analysis (FEA), using the explicit FEA solver Altair Radioss, has been developed to predict the effect of high mechanical loads with respect to triaxiality, large plastic strain and orthotropy. Finally, a simulation model of a PE separator was developed combining the novel failure criterion with Hill’s yield surface and a Swift−Voce hardening rule. The model succeeded in predicting the anisotropic response of the PE separator due to deformation and failure. The proposed failure model can also be combined with other constitutive material laws.