In this work, the carbothermal reduction and hydrochloric acid leaching were utilized for separation and recovery of iron and rare earth from the Bayan Obo tailings. The effects of temperature, addition of calcium oxide, and reaction time on the metallization rate of iron during roasting were investigated. The results showed that the metallization rate of iron reached 99.67% and the loss rate of fluorine was less than 1% under optimum roasting conditions of a temperature of 1100 degrees C, a coal ratio of 6.77 wt %, a calcium oxide ratio of 10 wt %, and a roasting time of 2 h. The behavior of iron and rare earth in magnetic separation was found to be controlled by the particle size after grinding. Using ball milling, 98.2% of rare earth and 96.7% of Fe were separated. A hydrochloric acid solution with a low concentration of 3 mol/L was used to leach rare earth from the magnetic separation tailings. The results showed that the leaching recovery of rare earth exceeded 99%, and more than 80% of other valuable elements were also leached out. Finally, the leaching residue contained 52.38 wt % of pure calcium fluoride, which can be used as a raw material for the flotation of fluorite.