Heterotrophic nitrification and aerobic denitrification (HNAD) sludge were successfully acclimated. The effects of organics and dissolved oxygen (DO) on nitrogen and phosphorus removal by the HNAD sludge were investigated. The nitrogen can be heterotrophically nitrified and denitrified in the sludge at a DO of 6 mg/L. The TOC/N (total organic carbon to nitrogen) ratio of 3 was found to result in removal efficiencies of over 88% for nitrogen and 99% for phosphorus. The use of demand-driven aeration with a TOC/N ratio of 1.7 improved nitrogen and phosphorus removal from 35.68% and 48.17% to 68% and 93%, respectively. The kinetics analysis generated an empirical formula, Ammonia oxidation rate = 0.08917·(TOC·Ammonia)0.329·Biomass0.342. The nitrogen, carbon, glycogen, and poly-β-hydroxybutyric acid (PHB) metabolism pathways of HNAD sludge were constructed using the Kyoto Encyclopedia of Genes and Genomes (KEGG). The findings suggest that heterotrophic nitrification precedes aerobic denitrification, glycogen synthesis, and PHB synthesis.