Battery recycling is a promising approach to mitigate the safety, environmental, and economic threats posed by numerous discarded lithium‐ion batteries (LIBs). However, the unclear atomic‐scale degradation of spent graphite complicates recycling, resulting in energy‐intensive impurity removal and graphitization, which hampers industrialization. This study uses Cryo‐transmission electron microscopy (Cryo‐TEM) to characterize spent graphite degradation and develop a scalable graphite self‐induced microwave plasma method for efficient regeneration. Cryo‐TEM images show graphite coated with a solid electrolyte interphase (SEI) layer, revealing lattice defects and structure expansion near the surface that impair electrochemical performance. The self‐induced microwave plasma method eradicates the SEI layer and restores the graphite lattice structure within 30 s. Multiphysics simulations indicate that the microwave field generates a strong electric field on the graphite surface, causing plasma discharge and rapid surface heating. Regenerated graphite demonstrates excellent electrochemical performance, with a specific charge capacity of 352.2 mAh g−1 at 0.2 C and ≈81% capacity retention after 400 cycles, matching commercially available materials. This efficient method offers a promising approach for recycling graphite anodes.