In this research, organic waste was subjected to hydrothermal carbonization (HTC) using faecal sludge as the water source. HTC is a sustainable method for converting organic waste into valuable hydrochar. However, the use of portable water as a reaction medium in HTC is environmentally unsustainable and increases operational costs. The aim of this study was to optimize HTC operating parameters such as residence time, temperature, and biomass to water (BTW) ratio for maximizing both higher heating value (HHV) and hydrochar yield and also to determine the effects of these operating parameters on the hydrochar properties. This study utilized a Box Behnken design within the response surface methodology to identify optimal HTC conditions. Temperature was varied between 180 and 250 °C, residence time between 30 min and 120 min, and BTW ratio between 1 and 10. Volatile matter percentage was reduced in the hydrochar compared to that of the feedstock. A progressive rise in carbon percentage and a decline in oxygen percentage were observed with increasing temperatures. Temperature and residence time were the most significant factors affecting HHV, on the other hand, temperature and BTW ratio were the most significant factors that affected hydrochar yield. Numerical optimization of the factors revealed that a maximum HHV of 28.409 MJ/kg was obtained at 250 °C, 116 min, and a 1:9 BTW ratio, while an ideal hydrochar yield of 57.491% was obtained at 242 °C, 95 min and a BTW ratio of 1:9. This study highlights the environmental sustainability of utilizing faecal sludge as a water source in HTC, presenting a promising possibility for transforming organic waste into valuable hydrochar while addressing concerns related to water use.