In this paper, a novel Multi-Stage Exhaust Energy Recycling strategy was proposed and optimized to maximize the system efficiency and performance of solid oxide fuel cell-combined heating and power (SOFC-CHP). Both process modeling and experiment work based on 1 kW SOFC-CHP systems were carried out to prove the concept and optimize the system. It is found that the system with multi-stage exhaust gas combustion (MS-EGC) will reduce the system operating temperature from 1149 °C to 830 °C, which significantly increases the safety of system operation and reduces the material requirement. The system combining MS-EGC with anode off gas recovery (MS-AOGR & EGC) leads to highest overall co-generation efficiency up to 92%. A coupled reactor integrating MS-EGC modules was developed and tested for a 1 kW SOFC system to realize the proposed strategy. The results showed that in MS-EGC, recycling of thermal energy at first stage rarely affects the chemical energy utilization in subsequent stages and the overall system performance, further confirming the advantages of the innovative multi-stage energy recycling strategy.