A mutual separation process that uses rare-earth oxychloride in a proactive way was developed. In particular, the heat-treatment conditions under which DyCl3 is converted into DyOCl (without causing such conversion of NdCl3) in dry oxygen with 6.5 ppm of H2O (dew point: 209 K) at a relatively low temperature (around 573 K) were determined. A difference between conversion reactions of the two kinds of rare-earth chlorides into rare-earth oxychlorides appeared in the case of an oxygen atmosphere with ultra-low H2O content, although this difference is usually hidden in the presence of atmospheric humidity. Under these conditions, high separability of a NdCl3 and DyCl3 mixture was demonstrated.