Limited animation is a process of making animated cartoons that do not follow a "realistic" approach. One of its major trademarks is the stylized design in all forms and shapes, which in the early days was referred to as modern design. The short cartoons and feature films of Walt Disney from the 1930s and 1940s are widely acclaimed for depicting animated simulations of reality, with exquisite detail in every frame. However, this style of animation is very time-consuming and expensive. "Limited" animation creates an image that uses abstract art, symbolism, and limited movement to create the same effect, but at a much lower production cost. This style of animation depends more upon suspension of disbelief to tell a story; the story exists more in the viewer's imagination. It also encourages the animators to indulge in artistic styles that are not necessarily bound to the limits of the real world. The result is a new artistic style that could not have developed if animation was solely devoted to producing simulations of reality. Without limited animation, such ground-breaking films as Yellow Submarine, Chuck Jones' The Dot and the Line, and many others could never have been produced.

The process of limited animation mainly aims at reducing the overall number of drawings. Film is projected at 24 frames per second (fps), but no animation studio would ever produce that many drawings. For movements in normal speed, most animation in general is done "on twos", meaning 12 drawings per second are recorded in a way that each drawing is on two frames of film. Faster movements may demand animation "on ones", while characters that do not move may be done with a single drawing (a "hold") for a certain amount of time. It is said that the Disney average was about 18 drawings per second, pretending that all characters of a scene share the same sheet of paper. Limited animation mainly reduces the number of inbetweens, the drawings between the keyframes which define a movement, thus reducing the smoothness of a movement.

Limited animation was originally founded as an artistic device, though it was soon used widely as a cost-cutting measure rather than an aesthetic method. The UPA studio made the first serious effort to abandon the ultra-realistic approach perfected by Disney. Their first effort at non-realistic animation, Gerald McBoing-Boing, won an Oscar, and it provided the impetus for limited animation to be accepted at the major Hollywood cartoon studios, including Warner Brothers and MGM. However, the real attraction of limited animation was the reduction in costs: because limited animation does not place a great emphasis on detail, it is much less expensive to produce. The 1950s saw all of the major cartoon studios change their style to limited animation, to the point where painstaking detail in animation occurred only rarely.

Most of Japanese animation (anime) consists of adapted techniques of limited animation. In this case, the technique is combined with manga styles and aesthetics, and is a very distinct style. Limited animation in anime is seen most frequently in television serials, but the aesthetic is so grounded in the medium that even bigger-budget feature films make use of it. Most Japanese animation is significantly less expensive than its American counterparts as a result, with Katsuhiro Otomo's Steamboy (the most expensive anime feature film yet produced) costing only $26,600,000.

Limited animation techniques in America were used during the 1960s and 1970s to produce a great number of inexpensive, poor quality TV cartoons, "Saturday morning cartoons". Such TV series as Clutch Cargo are infamous for being produced on ultra low budgets, with camera tricks used in place of actual animation. Despite the poor quality of the animation, the TV cartoon studios Hanna-Barbera and Filmation thrived during this period.

The cost-cutting techniques used to mass-produce cartoons on a low budget included:

• cels and sequences of cels were re-used over and over again—animators only had to draw a character walking once.
• characters are split up into different levels: only portions of a character, such as the mouth or an arm, would be animated on top of a static cel.
• clever choice of camera angles and editing
• use of camera techniques such as panning to suggest movement
• cell reversal (simply using a mirror image of the cell to represent the opposite angle). Many cartoon characters are drawn symmetrically to expedite this technique.
• the visual elements were made subsidiary to audio elements, so that verbal humor and voice talent became more important factors for success ("talking heads")
• sliding a cell across a background to suggest movement. This is frequently easy to spot as glare, dust and scratches on the cell are also clearly visible (more so in digital cleanups of older cartoons).

Animated cartoons which made use of limited animation included Gerald McBoing-Boing, Mister Magoo, The Rocky and Bullwinkle Show, The Pink Panther, The Flintstones, and Kinnikuman.

In recent years, nostalgia for the 1970s, combined with technologies such as Adobe Flash, have led to a revival of the genre of limited animation. Also, some modern graphic styles naturally translate into limited animation (My Life as a Teenage Robot, The Powerpuff Girls, Danny Phantom, Dexter's Laboratory, Samurai Jack).