Recently, nanostructured Si has been intensively studied as a promising anode candidate for lithium ion batteries due to its ultrahigh capacity. However, the downsizing of Si to nanoscale dimension is often impeded by complicated and expensive methods. In this work, natural halloysite clay was utilized for the production of Si nanoparticles through selective acid etching and modified magnesiothermic reduction processes. The physical and chemical changes of these samples during the various processes have been analyzed. The as-prepared HSi from halloysite clay is composed of many interconnected Si nanoparticles with an average diameter of 20–50 nm. Owing to the small size and porous nature, the HSi nanoparticles exhibit a satisfactory performance as an anode for lithium ion batteries. Without further modification, a stable capacity over 2200 mAh g−1 at a rate of 0.2 C after 100 cycles and a reversible capacity above 800 mAh g−1 at a rate of 1 C after 1000 cycles can be obtained. As a result, this synthetic route is cost-effective and can be scaled up for mass production of Si nanoparticles, which may facilitate valuable utilization of halloysite clay and further commercial application of Si-based anode materials.