The synthesis of SiAlON materials by the carbothermal reduction–nitridation (CRN) method paves the way for utilization of coal gangue with significant economic benefits. Excessive carbon (C), which provides a high residual C content in the product, is added to the raw materials to ensure a high yield of SiAlON. The industrial solid waste of coal-coke powder is used as a reductant. In this study, the effects of the reducing environment and C content on the CRN reaction of coal gangue using corundum and graphite crucibles are investigated and a method to reduce the amount of C added to the raw materials is proposed. The process is carried out under a N2 flow in the range of 1300–1500 °C with a holding time of 3 h. The effects of fusible components including CaO, Fe2O3, and MgO on the CRN reaction and micromorphology are discussed. The graphite crucible considerably promotes the conversion of mullite to β-SiAlON and is effective for the reduction in residual C content in the product. When the graphite crucible is used, the mullite wholly transforms to β-SiAlON and corundum, and β-SiAlON and AlN at 1400 °C when the C contents in the raw materials are 11% and 18%, respectively. The content of residual C in the product is approximately 1% (or lower). The β-SiAlON content decreases with the additions of CaO and MgO in the raw materials owing to sintering and melting. The addition of Fe2O3 promotes the formation of β-SiAlON whiskers according to the vapor–liquid–solid mechanism. These results would be useful in parameter optimization for a cleaner production of β-SiAlON powder using the CRN method.