The chlorination mechanism of neodymium oxide for the production of anhydrous neodymium chloride was analyzed based on the reaction temperature and reaction ratio of ammonium chloride, considering the suppression of the generation of NdOCl, an intermediate product of the reaction process. The results were obtained by distinguishing the shape of the produced NdCl3 (powder and bulk) and the setup of the chlorination equipment, reflecting its sensitivity to moisture and oxygen. The powdered form of NdCl3 produced at 400 °C and under argon gas flow was identified as NdCl3·6(H2O), while the bulk form of NdCl3 produced by melting at 760 °C after a chlorination process consisted of anhydrous NdCl3 and NdCl3∙n(H2O). The powdered NdCl3 produced in an argon gas environment with a controlled level of oxygen (below 16.05 ppm) and moisture (below 0.01 ppm) content was identified as single-phase anhydrous NdCl3 and showed the highest chlorination conversion rate of 98.65%. The addition of overstoichiometric ratios of NH4Cl in the chlorination process decreased the total amount of impurities (N, H, and O) in the NdCl3 product and increased the conversion rate of NdCl3.