The growing demand for lithium-ion batteries (LIBs), driven by the expansion of electric vehicles and renewable energy systems, raises critical challenges for resource sustainability and waste management. Recycling LIBs is increasingly viewed as a strategic approach to reduce environmental impacts and strengthen supply chain resilience. This article evaluates the potential of LIB recycling to support circular economy goals, with particular attention to regulatory frameworks, environmental trade-offs, material recovery, and emerging cross-sector applications. Focusing on the European context, and the revised EU Battery Regulation (2023/1542), the paper highlights key policy developments shaping battery end-of-life strategies. It also addresses technological trends in LIB recycling, including recovery efficiencies and second-life applications. While recovery rates for lithium and cobalt remain low globally, EU targets aim to accelerate improvements by 2031. Portugal, despite holding significant lithium reserves, lacks adequate LIB recycling infrastructure, resulting in high export and landfill rates. By outlining existing gaps and sectoral synergies—such as the use of lithium-based waste in construction materials—this study identifies opportunities for Portugal to align with EU circularity goals and expand its strategic role in the battery value chain and emphasizes the importance of coordinated public-private action.