The recoveries of rare earth elements (REEs), nickel, and cobalt from hybrid electric vehicle batteries by sulfation, selective roasting, and water leaching have been studied. The cathode and anode materials of a Panasonic Prismatic Module nickel metal hydride (NiMH) battery were used in the study. The optimal conditions for each step of the process were determined by performing lab-scale experiments. It was found that 8 mol/L of sulfuric acid was sufficient for the sulfation with a solid-to-liquid ratio of 1/5. The optimal roasting conditions was determined to be 850°C for 2 h. Under optimal conditions, 96% of the REEs could be obtained in the aqueous phase with negligible contamination of Ni and Co. The Ni and Co remained in solid phase as oxides together with traces of aluminum, zinc, and iron oxides. This method provides a way for the separation of the REEs from nickel, cobalt, and other elements present in the NiMH battery, into a leachate suitable for further processing.