As the consumption of rare earth elements (REEs) for many clean energy and consumer electronic sectors continues to grow, recycling REEs is essential due to the limited resources and high economic importance of high-value rare earth (RE). Herein, we describe the development of a novel alkali fusion, acid leaching, and liquid–liquid extraction process for the separation of lutetium from (Lu, Y)2SiO5 (LYSO) scrap using diglycolamide-based task-specific ionic liquids (DGA-TSILs). The comprehensive disintegration of LYSO through alkaline fusion is discussed and subsequently optimized parameters were employed to extract REEs from LYSO under low acidity conditions during hydrochloric acid leaching. Two DGA-TSILs were used for the extraction of Lu(III) and Y(III) from chloride system. McCabe-Thiele diagram was constructed to determine the number of stages needed for the separation of Lu(III) from LYSO leachate, and stripping of Lu(III) from the loaded organic phase was achieved with 0.01 mol/L HCl solution. These results provide a green alternative to conventional methods of strategically important REEs recycling from LYSO scrap.