The LiNixCoyMn1-x-yO2 (NCM) cathode materials have emerged as critical components in lithium-ion batteries due to their high energy and power densities. The co-precipitation method is widely used in laboratory and industry settings to optimize the crystallinity, grain morphology, particle size, and sphericity of precursor materials, directly affecting NCM battery performance. This review addresses the nucleation mechanism and the thermodynamic and kinetic reaction processes of co-precipitation. The comprehensive effects of key parameters on precursor physicochemical properties are also systematically interpreted. Notably, precursor characterization and physicochemical properties, including impurity levels and tolerance limits relevant to production, are highlighted. Finally, optimization strategies for developing high-quality precursor materials toward commercialization are proposed. This systematic review provides a deeper understanding of precursor optimization and advances relevant theories for the development of NCM cathode materials.