Sludge is a semi-solid waste generated during the process of wastewater treatment. Due to the addition of polymerized ferric chloride in the flocculation process, the sludge produced by the sewage treatment plant in Liaocheng Jiaming Industrial Park contains a high content of iron oxide. In this paper, chemical analysis and particle size analysis of local sludge and sludge ash were conducted. In order to assess the potential of substituting cement as cementitious material with different dosages of sludge or sludge ash with high iron oxide content, setting time, compressive strength, microscopic analysis using microscopic testing (XRD, TG/DTG, SEM) and a toxicity characteristic leaching procedure (TCLP) were analyzed. These procedures determined the physical properties, compressive strength, hydration products, microstructure, and heavy metal contaminants of cement slurries replaced by local sludge or sludge ash with different dosages of high iron oxide content. The results show that less than 5% of local sludge or sludge ash can be incorporated into cement slurry as an alternative cementitious material for solid waste disposal.