This study presents a novel approach for one-step hydrothermal synthesis of iron phosphate dihydrate (FePO4·2 H2O) using ferric salt dephosphorization sludge (FePs) from liquor wastewater. The gradual dissolution of FePs, facilitated by increasing temperatures and concentrations of phosphoric acid, releases Fe3+ and PO43- ions during hydrothermal reactions. These ions recrystallize into iron phosphate dihydrate and iron hydroxy-phosphate (Fe5(PO4)4(OH)3·2 H2O) depending on the conditions. Through a single-factor experiment, the effects of total organic carbon (TOC) in FePs and hydrothermal reaction conditions on the phase and morphology of the products were investigated, then the recrystallization process of iron phosphate dihydrate was also simulated by molecular dynamics. The first charge/discharge capacities of lithium iron phosphate (LFP) batteries synthesized from the optimal products were 153.1 and 149.4 mAh·g−1 at 0.1 C rate, respectively, and the cycling performance could be maintained under different rates, which has a good application prospect. The reaction fully utilized the iron and phosphorus resources in FePs, and the filtrate could be recycled to avoid the waste of resources, which provided a new idea for the resource utilization of FePs.