Recently, lithium-ion batteries (LIBs) play an increasingly important role in daily life, and recycle of LIBs material has also become a hotspot. Herein, the degradation mechanisms of layered transition metal oxide, LiNi0.5Co0.2Mn0.3O2 (NCM523) single crystal particles, are comprehensively investigated by the atomic analysis and simulations of Aberration-corrected scanning transmission electron microscope (STEM) and Density Functional Theory (DFT). Based on understanding the degradation mechanisms, a direct regeneration technology is adopted to recover the degraded cathode materials (≈ 10% capacity retains) by hydrothermal treatment combined with a solid-state eutectic Li+ molten-salt solutions sintering step. The regenerated cathodes present a layered crystalline structure in the whole phase region and the capacity of pouch cell (1.7 Ah) remains 90.8% after 500 cycles with the mass loading of cathode around 21 ± 0.5 mg cm−2. In addition, the modified strategies are applied in the regenerations of different degraded samples such as LiNi1/3Co1/3Mn1/3O2 and commercially-purchased spent samples, which show the capacity maintain more than 90% after 500 cycles. Therefore, the direct regeneration technology supported with experiments and simulation affords a foundational direction for the sustainable development of energy materials.