The rapid growth of electric vehicle use is expected to cause a significant environmental problem in the next few years due to the large number of spent lithium‐ion batteries (LIBs). Recycling spent LIBs wouldn't only alleviate the environmental problems but also address the challenge of limited natural resources shortages. While several hydro‐ and pyrometallurgical processes have been developed for recycling different components of spent batteries, direct regeneration presents clear environmental and economic advantages. The principle of the direct regeneration approach is restoring the electrochemical performance by healing the defective structure of the spent materials. Thus, the development of direct regeneration technology largely depends on the formation mechanism of defects in spent LIBs. This review systematically detailed the degradation mechanisms and types of defects found in diverse cathode materials, graphite anodes, and current collectors during the battery's lifecycle. Building on this understanding, we've outlined principles and methodologies for directly rejuvenating materials within spent LIBs. We also propose the main challenges and solutions for the large‐scale direct regeneration of spent LIBs. Furthermore, this review aims to pave the way for the direct regeneration of materials in discarded lithium‐ion batteries by offering a theoretical foundation and practical guidance.This article is protected by copyright. All rights reserved