Urban mining of electronic waste, particularly lithium-ion batteries (LiBs), is crucial for addressing critical raw material demands and reducing environmental impact. This research explores sustainable LiB recycling through a comprehensive approach encompassing literature review, process optimization, life cycle assessment (LCA), and life cycle costing (LCC) to maximize resource recovery while minimizing the environmental footprint. The first phase systematically reviews LiB recycling technologies, focusing on developing a decentralized pretreatment line for diverse battery chemistries. Key steps, including crushing, density separation, heating with CaO, and flotation-based separation, enhance material recovery and compatibility with various LiB types. The second phase investigates hydrometallurgical techniques for recovering cathode materials, achieving over 83% cobalt oxide, 77% nickel oxide, and 74% manganese oxide recovery. Optimization of leaching, purification, and calcination reduced energy demand and environmental impact by fourfold, demonstrating the feasibility of sustainable recovery methods. A comparative analysis of graphite recovery methods in the third phase highlights the cold process as the most sustainable and cost-effective, with a recovery cost of $-40/kg and a single score impact (SSI) of -432 μpt. The hot process achieved high-quality graphite with the lowest interlayer spacing (0.345 nm), while the wet process produced high-carbon graphite but with significant environmental trade-offs (SSI of 695 μpt). The final phase explores the reuse of residual graphite in wastewater treatment. Graphene oxide (GrO) synthesized from residual graphite demonstrated superior adsorption capacities, achieving 97% dye removal and 94% metal removal, outperforming commercial alternatives. This study highlights the potential of sustainable LiB recycling to support a circular economy. By integrating environmental and economic considerations, the developed methods provide scalable solutions for urban mining, emphasizing LiB recycling’s pivotal role in sustainable resource management.