The purity of the final rare earth elements (REE) product is a valuable key factor for the market. Therefore, elimination of impurities is a prominent step in REE producing route which is performed after water leaching of the acid baked REE concentrate. Lime neutralization is a preferred process due to its high efficiency in the removal of impurities and low reagent cost. However, drawbacks such as co-precipitation of REE with calcium sulfate dihydrate (CaSO₄·2H₂O, CSD), which results in a significant REE loss, renders this process inefficient. This study focuses on reducing in the operating costs and improving the process by lowering the REE loss during the impurity removal step from the pregnant leach solutions (PLS). The elimination of REE can have substantial impact on the feasibility of the process. A feasible route to eliminate or minimize the REE loss associated with the lime neutralization process is to use a crystal habit modifier to alter the crystalline morphology and surface Ca(OH)₂ of CSD and subsequently reduce the portion of REE lost to the CSD. In this study, cetryltrimethylammonium bromide (CTAB) and polyacrylic acid (PAA) were employed as cationic and anionic modifiers at concentrations of 0.2, 2, and 5 g/L to reduce the REE loss to CSD in a titration process simulating the impurity removal step. In addition, the effects of temperature and Ca(OH)2 pulp density on the co-precipitation process and morphology changes were investigated. The mechanism of co-crystallization and sorptive Ca(OH)₂ of rare earth elements (REE) with calcium sulfate dihydrate (CSD) crystallization were examined thoroughly using an array of characterization techniques such as SEM, XPS, ToF-SIMS and so on. The effects of the two of the main impurities, Fe and Al, and different reagents of Ca(OH)2, Mg(OH)2, and NaOH were investigated to remove Fe and Al from the synthetic REE leaching solution. Four different concentrations of 4, 2, 1 and 0.5 g/L for Fe and Al impurities were examined. Also the REE loss at different impurity contents was studied using Ca(OH)2 for neutralization. Finally, based on the results of the study a two-step impurity removal process was proposed to remove iron and aluminum. This process was followed by acid leaching of the gypsum-Al-Fe residues of each step to recover the lost REE from the residue and thus improve the efficiency of the process with Ca(OH)2.