The explosion of electric vehicles (EVs) has triggered massive growth in power lithium-ion batteries (LIBs). The primary issue that follows is how to dispose of such large-scale retired LIBs. The echelon utilization of retired LIBs is gradually occupying a research hotspot. Solving the issue of echelon utilization of large-scale retired power LIBs brings not only huge economic but also produces rich environmental benefits. This study systematically examines the current challenges of the cascade utilization of retired power LIBs and prospectively points out broad prospects. Firstly, the treatments of retired power LIBs are introduced, and the performance evaluation methods and sorting and regrouping methods of retired power LIBs are comprehensively reviewed for echelon utilization. Then, the problems faced by the scenario planning and economic research of the echelon utilization of retired power LIBs are analyzed, and value propositions are put forward. Secondly, this study summarizes the technical challenges faced by echelon utilization in terms of security, performance evaluation methods, supply and demand chain construction, regulations, and certifications. Finally, the future research prospects of echelon utilization are discussed. In the foreseeable future, technologies such as standardization, cloud technology, and blockchain are urgently needed to maximize the industrialization of the echelon utilization of retired power LIBs.