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Light emitting diodes (LEDs) have accounted for most of the lighting market as the technology matures and costs continue to reduce. As a new type of e-waste, LED is a double-edged sword, as it contains not only precious and rare metals but also organic packaging materials. In previous studies, LED recycling focused on recovering precious and strategic metals while ignoring harmful substances such as organic packaging materials. Unlike crushing and other traditional methods, hydrothermal treatment can provide an environment-friendly process for decomposing packaging materials. This work developed a closed reaction vessel, where the degradation rate of plastic polyphthalamide (PPA) was close to 100%, with nano-TiO2 encapsulated in plastic PPA being efficiently recovered, while metals contained in LED were also recycled efficiently. Besides, the role of water in plastic PPA degradation that has been overlooked in current studies was explored and speculated in detail in this work. Environmental impact assessment revealed that the proposed recycling route for waste LED could significantly reduce the overall environmental impact compared to the currently published processes. Especially the developed method could reduce more than half the impact of global warming. Furthermore, this research provides a theoretical basis and a promising method for recycling other plastic-packaged e-waste devices, such as integrated circuits.