This review discusses the critical role of fundamentals of battery recycling in addressing the challenges posed by the increasing number of spent lithium-ion batteries (LIBs) due to the widespread use of electric vehicles and portable electronics, by providing the theoretical basis and technical support for recycling spent LIBs, including battery classification, ultrasonic flaw detection, pretreatment (e.g., discharging, mechanical crushing, and physical separation), electrolyte recovery, direct regeneration, and theoretical calculations and simulations. Physical chemistry principles are essential for achieving effective separation of different components through methods like screening, magnetic separation, and flotation. Electrolyte recovery involves separation and purification of electrolytes through advanced physical and chemical techniques. Direct regeneration technology restores the structure of electrode materials at the microscopic scale, requiring precise control of the physical state and crystal structure of the material. Physical processes such as phase changes, solubility, and diffusion are fundamental to techniques like solid-state sintering, eutectic-salt treatment, and hydrothermal methods. Theoretical calculations and simulations help predict the behaviour of materials during recycling, guiding process optimization. This review provides insights into understanding and improving the recycling process, emphasizing the central role of physical chemistry principles in addressing environmental and energy issues. It is valuable for promoting innovation in spent LIB recycling processes and is expected to stimulate interest among researchers and manufacturers.