With the rapid development of new energy devices, a large amount of spent lithium-ion batteries (LIBs) are produced every year. Recovering valuable metals from spent LIBs is significant for achieving environmental protection and alleviating resource shortages. In this study, a novel approach by in situ thermal reduction technology with waste copperas is developed to recycle valuable metals from spent LiCoO₂ (LCO) batteries. The mechanism study through in situ x-ray diffractometer and thermal analysis reveal that the sulfation of LCO underwent two pathways i.e., ion exchange and gas-solid reactions. In the ion exchange pathway, the layered structure of LCO collapse due to the reduction by divalent iron in copperas, and the detachment of lithium ions result in a larger lattice spacing of transition metal layer and formation of a stable spinel structure. Furthermore, the SO₂ generated from the decomposition of iron sulfates reduces the unreacted LCO through gas-solid interactions, realizing the sulfation of lithium and cobalt completely. Economic analysis indicates the potential benefit of this process is approximately 8266$/t spent LCO. This study provides an alternative technological route and a new approach to green recovery of the spent LCO batteries, exhibiting great potential for wide applications.