Direct recycling is a promising approach for valorizing spent lithium-ion batteries, yet the effect of impurities on cathode regeneration has been insufficiently explored. Herein, an end-of-life LiNi$_{0.6}$Co$_{0.2}$Mn$_{0.2}$O$_2$ (NCM622) pouch cell is used as a model system to systematically investigate the behavior of impurities and the outcomes for regeneration, using XPS, SRD, and XAS techniques. The analysis identifies AlPO$_4$, AlF$_3$, Li$_3$PO$_4$, LiF, Li$_x$PF$_y$O$_4$, and Li$_2$CO$_3$ as the main impurities in the spent powder, along with Al-inclusion limited to a surface near region. Among these, Al- and F-containing species are found to significantly affect the regeneration process, inducing further Al- and F-inclusion in the regenerated material, while PO$_4$$^{3–}$ species exhibit a minimal structural impact. In-depth structural analysis reveals that F-inclusion proceeds via substitution of lattice oxygen, causing increased structural disorder. Al-inclusion most likely involves epitaxial crystal growth promoted by excess lithium salts, resulting in structural asymmetry at elevated inclusion levels. Electrochemical evaluation shows that low-level impurity inclusion has a negligible effect on initial capacity. Yet, impurity accumulation, potentially amplified over repeated recycling, markedly compromises capacity recovery and structural integrity. This work clarifies impurity-induced effects during regeneration and highlights the importance of impurity control for enabling sustainable and effective direct recycling.