Sandy grade alumina is a valuable intermediate material that is mainly produced by the Bayer process and used for manufacturing primary metallic aluminum. Coal fly ash is generated in coal-fired power plants as a by-product of coal combustion that consists of submicron ash particles and is considered to be a potentially hazardous technogenic waste. The present paper demonstrates that the Al-chloride solution obtained by leaching coal fly ash can be further processed to obtain sandy grade alumina, which is essentially suitable for metallic aluminum production. The novel process developed in the present study involves the production of amorphous alumina via the calcination of aluminium chloride hexahydrate obtained by salting-out from acid Al-Cl liquor. Following this, alkaline treatment with further Al2O3 dissolution and recrystallization as Al(OH)3 particles is applied, and a final calcination step is employed to obtain sandy grade alumina with minimum impurities. The process does not require high-pressure equipment and reutilizes the alkaline liquor and gibbsite particles from the Bayer process, which allows the sandy grade alumina production costs to be to significantly reduced. The present article also discusses the main technological parameters of the acid treatment and the amounts of major impurities in the sandy grade alumina obtained by the different (acid and acid-alkali) methods.