The rapidly increasing amount of end-of-life lithium iron phosphate (LiFePO4) batteries has raised significant environmental concerns. This study offers a strategy for a paradigm shift by transforming this growing waste into a valuable resource by recycling discarded LiFePO4 batteries and safely integrating the materials into sustainable agriculture. We used five types of LiFePO4 (10, 50 mg kg−1) applied to soil planted with peanuts in a full-culture experiment. Our results show that addition of <50 mg kg−1 of recycled nano-LiFePO4 (rn-LiFePO4) has a multifaceted positive impact on peanut because of sustainable release of nutrients and nano-specific effects, not only enhancing photosynthesis and root growth but also increasing yield by 22 %–34 % while simultaneously elevating seed nutritional quality. Moreover, a remarkable reduction (up to 99.78 % at 10 mg kg−1 rn-LiFePO4) in the expression of allergen genes was evident following exposure to LiFePO4, which showed a significant negative correlation with Fe content in the seeds. The decreased peanut allergen gene expression was mediated by a downregulation of metabolites associated with protein digestion and absorption. Furthermore, rhizosphere soil immune system enhancement may indirectly enhance immune responses to peanut allergy. This study suggests the significant potential of nanoscale LiFePO4 recycled from Li battery, including enhancing crop yield quality and mitigating peanut allergy concerns while simultaneously addressing a growing waste stream of concern.