Lithium-ion batteries (LIBs) contain valuable elements, which need to be recovered to sustain the production of new LIBs and reduce the use of virgin resources. In this paper, a laboratory-scale study is carried out to investigate the smelting reduction behavior of electrode materials and the formation mechanism of volatile Li-containing species. The aims are to recover Co, Ni, and Mn in the metal phase and simultaneously recover lithium in the flue dust. The results from smelting reduction of chemical-grade LiCoO2 without and with the presence of halides (CaF2 and CaCl2) indicate that component Co2O3 in LiCoO2 could be reduced to Co metal; meanwhile, component Li2O in LiCoO2 could be reduced to lithium metal vapor or converted into volatile lithium halides (LiF and LiCl) and subsequently be recovered in the flue dust. The results from smelting reduction of electrode materials of spent LIBs indicate that the electrode materials can be smelted into Co–Ni–Mn alloys, and simultaneously lithium can get concentrated and recovered in the flue dust as Li2CO3 and LiF. The absence of a slag allows a nearly 100% recovery of Co, Ni, and Mn in the formed alloy and a nearly 100% recovery of lithium in the flue dust.