Nanostructured Si is a very promising anode material for lithium-ion batteries as Si possesses a theoretical specific capacity almost ten times higher than that of the conventional graphite anodes. However, difficulties associated with a low-cost and scalable production and unstable electrode/electrolyte interface of nanostructured Si limit their practical application. Herein, an improved route is developed for preparation of crystalline Si nanoparticles by directly reacting metallurgical-grade Si with ethanol catalyzed by Cu-based catalysts at 200 °C to generate alkoxysilane and Si nanostructures and the latter were ball-milled to obtain the desired Si nanoparticles. The particle size of the crystalline Si nanoparticles could be well tuned by adjusting the reaction time and the amount of ethanol. Furthermore, the surfaces of obtained Si nanoparticles were in situ modified by organic functional groups (R–CH2-OH, R–COOH, etc.), confirmed by FTIR and 1H solid-state NMR, which reacted with lithium in the 1st lithiation to form a stable artificial solid electrolyte interphase layer. As tested, the pristine Si nanoparticles exhibited both high reversible capacity and good cycle life even close to that of the carbon-coated Si nanoparticles. Ultimately, this route is cost-effective for scalable manufacture of Si nanoparticles with in situ functionalized surface that can facilitate formation of stable solid electrolyte interphase layer.