AbstractThe growing demand and production of lithium‐ion batteries (LIBs) have led to a critical concern regarding their resources and end‐of‐life management. Consequently, LIB recycling has emerged as a prominent topic in academia and in industries, driven by new worldwide governmental regulations and the increasing gap between the supply and demand of critical and strategic raw materials. Widely considered as a more sustainable and cheaper recycling method compared to pyrometallurgy and hydrometallurgy, direct recycling currently grabs the spotlight. This perspective provides insights and outlooks on the chemical and technological challenges of the innovative direct recycling approach for LIBs, addressing both the production scraps and batteries at their end‐of‐life (EOL). Technological advancements, changes in battery chemistry, along with the LIB market dynamics and collaborations between battery makers and recyclers, are key drivers of LIB waste recycling. While production scraps lend themselves well to direct recycling, EOL batteries encounter challenges in adopting this novel recycling technology. Besides, the need to assess novel direct recycling processes using Life Cycle Assessment (LCA) is also important for identifying eco‐design strategies and optimizing the processes, leading to a more sustainable energy storage system.