Recycling spent lithium-ion batteries (LIBs) using chemical-saving and energy-effective pathways has been pursued to minimize the secondary environmental footprints. In this study, a sealed stainless-steel reactor was selected to achieve CO2-assisted low-temperature thermal reduction of spent LiCoO2 by carbon at 500 °C. The thermal reduction was provoked by the in-situ generated CO that resulted from the reaction of carbon and CO2. More importantly, MgCO3 was used as a CO2 holder to provide CO2 at elevated temperatures and MgO can be used to absorb CO2 to regenerate MgCO3, enabling the CO2 as a clean additive in the reduction reaction. Using this low-temperature reduction coupled with the carbonate pyrolysis approach, the selective recovery of Li reached 94.21%. The spatial isolation of MgCO3 at the bottom layer, graphite at the middle layer, and LiCoO2 at the top layer in the same reactor avoids complex separation. In addition, LiCoO2 is directly regenerated by the obtained CoO/Co3O4 and Li2CO3, and regenerated LiCoO2 exhibits good electrochemical performance with a discharge capacity retention of 94.0% after 300 cycles. Overall, the carbonate pyrolysis in the close-reactor is a promising approach to achieving a low-temperature reduction reaction by using CO2 as a clean agent to recycle spent LIBs.