Efficient and selective recovery of rare earth elements (REE) from NdFeB magnet waste remains challenging due to co-dissolution of iron in conventional hydrometallurgical processes. In this study, an aeration-assisted FeCl2·4H2O leaching system was developed to achieve selective REE dissolution with in-situ iron removal. The effects of lixiviant, lixiviant concentration, temperature, particle size, and solid-to-liquid (S/L) ratio were systematically investigated. Under optimized conditions (10% excess FeCl2·4H2O, 70 °C, S/L = 1:20, particle size <88 μm), ~99.1% REE dissolution was achieved within 4 h, while iron dissolution was suppressed to ~0.14%. Temperature and S/L ratio significantly influenced dissolution efficiency, with REE recovery improving from ~90.4% at room temperature to ~99.1% at 80 °C, and from ~77.5% (S/L 1:10) to ~99.1% (S/L 1:20). A comparison of lixiviants revealed superior performance of chloride systems. FeCl2·4H2O and HCl achieved ~99.1% and ~98.8% REE recovery, respectively, whereas sulphate-based systems (FeSO4.7H2O and H2SO4) showed lower efficiencies of ~89.5% and ~90.7%. Chloride media exhibited more favorable pH and redox evolution, leading to enhanced selectivity and lower residual iron. Characterization confirmed that iron was converted into oxyhydroxide phases, predominantly γ-FeOOH, while REE selectively dissolved in solution. The recovered REE were precipitated as oxalates and converted to high-purity oxides after calcination. The study demonstrates a simple and efficient route for selective REE recovery via aeration leaching, offering strong potential for sustainable NdFeB recycling.