Naphthenic acids (NAs) are a mixture of aliphatic and alicyclic carboxylic acids which are persistent in the environment. In this study, a sludge-based biochar/iron oxide (B-FeOx) catalyst with 3D flower-like shaped structure was prepared through a facile hydrothermal method. For the first time, the B-FeOx catalyst was employed to activate peroxymonosulfate (PMS) for the removal of two model NA compounds (1-adamantanecarboxylic acid (ACA) and 4-methylheptanoic acid) at pH 8.50. Compared to biochar or FeOx alone, a higher degradation efficiency (96.1%) and faster degradation rate (k = 0.100 min−1) of ACA were obtained by the B-FeOx composite at a catalyst dose of 2.0 g/L and PMS dose of 2.5 mM. The higher degradation efficiency of B-FeOx was attributed to the improved surface area and pore volume as well as the abundant reactive sites induced by the flower-like structure. Furthermore, the hydroxyl radical (•OH) generated in the B-FeOx/PMS system was the dominant radical for both ACA and 4-methylheptanoic acid degradation as demonstrated through radical quenching experiments. The presence of chloride ions in the B-FeOx/PMS system showed a suppression effect on the degradation of ACA and 4-methylheptanoic acid at Cl− concentrations between 5 and 20 mM. No significant difference in the degradation rates of ACA and 4-methylheptanoic acid was observed at different Cl− concentrations. Overall, the results of this study showed that the sludge (waste material)-based B-FeOx composite may have the potential to be utilized as PMS catalyst for the removal of NAs that are especially abundant in oil sands process water.