The invention particularly relates to a sludge treatment and recycling method. The method comprises the following steps: sludge conditioning, sludge deep dewater, crushing and granulation, sludge drying, and sludge pyrolysis carbonization reaction. By using an iron salt as the main conditioner, deep dewatering is carried out on the sludge to lower the water content from 90% or above to 60% or below, thereby reducing the heat source required by the subsequent drying. The sludge drying adopts the heat energy released by combustion of combustible gas generated by the subsequent carbonization technique, thereby lowering the water content of the sludge to 20% or so on the premise of basically not adding any external energy source. Since the iron salt is added in the sludge conditioning stage, when the dried sludge is subjected to anoxic / anoxic pyrolysis reaction in the carbonization furnace, the iron oxides can be supported onto sludge-base activated carbon, thereby preparing the environment-friendly material with wide applicability. Therefore, the method implements harmless and recycling treatment on the sludge at lower cost, can treat waste with waste, produces the product with higher economic added value, and thus, has higher economic and social values.