Cobalt’s pivotal role in global development, especially in lithium-ion batteries, entails driving increased demand and strengthening global trading networks. The production of different waste solutions in metallurgical operations requires the development of an environmentally friendly research strategy. The ultrasonic spray pyrolysis and hydrogen reduction method were chosen to produce nanosized magnetic powders from waste solution based on iron and cobalt obtained during the purification process of used polycrystalline diamond blanks. With specific objectives focused on investigating the impact of reaction temperature and residence time on the morphology, chemical composition, and crystal structure of synthesized nanosized cobalt powders, our research involved 15 experimental runs using two reactors with varying residence times (7.19 s and 23 s) and distinct precursors (A, B, and C). Aerosol droplets were reduced at 600 to 900 °C with a flow rate of 3 L/min of argon and hydrogen (1:2). Characterization via scanning electron microscopy (SEM), energy dispersive spectroscopy (EDS), and X-ray diffraction revealed that higher temperatures influenced the spherical particle morphology. Altering cobalt concentration in the solution impacted the particle size, with higher concentrations yielding larger particles. A short residence time (7.9 s) at 900 °C proved optimal for cobalt submicron synthesis, producing spherical particles ranging from 191.1 nm to 1222 nm. This research addresses the environmental significance of recovering magnetic particles from waste solutions, contributing to sustainable nanomaterial applications.