Titanium hydride (TiH2) is one of the basic materials for titanium (Ti) powder metallurgy. A novel method was proposed to produce TiH2 from the reduction of titanium tetrachloride (TiCl4) with magnesium hydride (MgH2) in the hydrogen (H2) atmosphere. The primary approach of this process is to produce TiH2 at a low-temperature range through an efficient and energy-saving process for further titanium powder production. In this study, the thermodynamic assessment and technoeconomic analysis of the process were investigated. The results show that the formation of TiH2 is feasible at low temperatures, and the molar ratio between TiCl4 and metal hydride as a reductant material has a critical role in its formation. Moreover, it was found that the yield of TiH2 is slightly higher when CaH2 is used as a reductant agent. The calculated equilibrium composition diagrams show that when the molar ratio between TiCl4 and metal hydrides is greater than the stoichiometric amount, the TiCl3 phase also forms. With a further increase in this ratio to greater than 4, no TiH2 was formed, and TiCl3 was the dominant product. Furthermore, the technoeconomic study revealed that the highest return on investment was achieved for the production scale of 5 t/batch of Ti powder production, with a payback time of 2.54 years. The analysis shows that the application of metal hydrides for TiH2 production from TiCl4 is technically feasible and economically viable.