Gas selective reduction–oxidation (redox) and melting separation were consecutively applied to electrode materials of AB5-type Ni-metal hydride batteries leading to the production of a Ni-Co alloy and slag enriched with rare earth oxides (REO). In the selective redox process, electrode materials were treated with H2/H2O at 1073 K and 1173 K (800 °C and 900 °C). Active elements such as REs, Al, and Mn were oxidized whereas relatively inert elements such as Ni and Co were transformed into their elemental states in the treated materials. SiO2 and Al2O3 powders were added into the treated materials as fluxes which were then melted at 1823 K (1550 °C) to yield a Ni-Co alloy and a REO-SiO2-Al2O3-MnO slag. The high-purity Ni-Co alloy produced can be used as a raw material for AB5-type hydrogen-storage alloy. The REO content in slag was very high, i.e., 48.51 pct, therefore it can be used to recycle rare earth oxides.