Direct recycling of spent lithium‐ion batteries (LIBs) is a promising technology for resource sustainability and environmental conservation. However, the lithium sources for cathode regeneration are typically mono‐functional, resulting in low performance enhancement of the recycled material. Herein, we report a one‐step direct upcycling method to recycling degraded lithium cobalt oxide (D‐LCO) with lithium lignosulfonate (Li‐L). Li‐L as a multifunctional organic lithium salt can spontaneously attach to the surface of the D‐LCO molecules, thus providing replenishment of Li and doping of elemental sodium and sulfur during the regeneration process. Benefiting from the more stable structure of regenerated LCO supported by Na and S elements, the diffusion efficiency of Li ions and electrons can be improved during charging/discharging. As a result, the cell with upcycling LCO cathode exhibits a high capacity of 220.7 mAh g−1 at 0.1 C and retention rate of 89.7% after 300 cycles at 10 C with a maximum cut‐off voltage of 4.6 V. More importantly, life‐cycle analysis shows that the upcycling method performs optimally in environmental protection and energy conservation, as well as economic benefits, providing a prospective pathway for the large‐scale application of recycling spent batteries.