<jats:p>With the increasing deployment of lithium iron phosphate (LiFePO4) batteries in electric vehicles and energy storage systems, the recycling of these materials has become an urgent necessity. Specifically, the reclamation of lithium iron phosphate cathode materials presents a significant challenge in the recycling process. In this study, we proposed an efficient low-temperature hydrothermal direct regeneration method aimed at repairing lithium vacancies and Fe/Li inversion defects in spent lithium iron phosphate resulting from prolonged cycling. By using this method, spent lithium iron phosphate was successfully regenerated through a hydrothermal process conducted at 80 °C for 6 h, utilizing hydrazine hydrate (N2H4·H2O) as a potent reducing agent and lithium hydroxide (LiOH·H2O) as the lithium source. X-ray diffraction (XRD) analysis, coupled with Rietveld refinement, revealed a substantial reduction in the concentration of Fe/Li anti-site defects in the spent material, decreasing from 8.8% to 3.3% following regeneration. Consequently, the electrochemical performance was significantly restored. The initial specific discharge capacity increased from 118.0 mAh·g−1 to 150.3 mAh·g−1, and the capacity retention after 100 cycles (at 1 C) improved from 67.5% to 90.7%. The hydrothermal regeneration process introduced in this work effectively repairs the material structure and restores the active valence state of iron, thereby significantly enhancing lithium-ion diffusion and electron transport capabilities. This approach constitutes a technically viable solution for the efficient, environmentally friendly, and cost-effective recycling of spent lithium-ion batteries.</jats:p>