Polycrystalline tin is an ideal excitation material for extreme ultraviolet light sources. However, the existence of grain boundary (GB) limits the surface roughness of polycrystalline tin after single-point diamond turning (SPDT). In this work, a novel method termed inductively coupled plasma (ICP)-assisted cutting was developed for the sub-nanometer finishing of polycrystalline tin. The relationship between ICP power, processing time, and modification depth was established by thermodynamic simulation, and the fitted heat transfer coefficient of polycrystalline tin was 540 W/(m²·K). The effects of large-thermal-gradient ICP treatment on the microstructure of polycrystalline tin were studied. After 0.9 kW ICP processing for 3.0 s, corresponding to the temperature gradient of 0.30 K/µm, the grain size of polycrystalline tin was expanded from a size of approximately 20–80 μm to a millimeter scale. The Taguchi method was used to investigate the effects of rotational speed, depth of cut, and feed rate on SPDT. Experiments conducted based on the ICP system indicated that the plasma-assisted cutting method promoted the reduction of the influence of GB steps on the finishing of polycrystalline tin, thereby achieving a surface finish from 8.53 to 0.80 nm in Sa. The results of residual stress release demonstrated that the residual stress of plasma-assisted turning processing after 504 h stress release was 10.7 MPa, while that of the turning process without the ICP treatment was 41.6 MPa.