A large amount of silicon debris particles are generated during the slicing of silicon ingots into thin wafers for the fabrication of integrated-circuit chips and solar cells. This results in a significant loss of valuable materials at about 40% of the mass of ingots. In addition, a hazardous silicon sludge waste is produced containing largely debris of silicon, and silicon carbide, which is a common cutting material on the slicing saw. Efforts in material recovery from the sludge and recycling have been largely directed towards converting silicon or silicon carbide into other chemicals. Here, we report an aerosol-assisted method to extract silicon nanoparticles from such sludge wastes and their use in lithium ion battery applications. Using an ultrasonic spray-drying method, silicon nanoparticles can be directly recovered from the mixture with high efficiency and high purity for making lithium ion battery anode. The work here demonstrated a relatively low cost approach to turn wafer slicing wastes into much higher value-added materials for energy applications, which also helps to increase the sustainability of semiconductor material and device manufacturing.