Mineral carbonation of alkali solid wastes is envisaged to be an effective method to sequester CO2 and turn the wastes into more valuable end products. Steel slag generated from the steel-making industry contains a high content of calcium oxide, which is a potential medium to sequestrate CO2 via the carbonation process. In this paper, the influence of reaction parameters including solid to liquid ratio, CO2 flow rate, temperature, volume of water and carbonation time on aqueous carbonation of basic oxygen furnace slag (BOFS) in maximizing CO2 sequestration was determined. The structural and mineralogical changes of carbonated BOFS were also analyzed using thermogravimetric analysis, X-ray diffraction, and scanning electron microscopy. Using an optimized aqueous carbonation condition, about 16.35% of CO2 can be sequestered, which was obviously higher compared with dry carbonation (about 4.91%) at ambient conditions. Subsequently, the effect of replacing cement with carbonated BOFS (either by aqueous or dry route) on the micro-mechanical properties and hydration characteristics of blended cement paste was studied. The results demonstrated that as a small ratio of aqueous carbonated BOFS (10%-20%) blended in the cement paste they can accelerate the rate of early heat evolution during the first 24 h. On the contrary, as the carbonated BOFS ratio increased, the overall heat of hydration and mechanical strength were decreased. In comparison, BOFS carbonated by aqueous method is found to perform better in blended cement paste than its counterpart carbonated by dry method at the same replacement ratio due to the presence of a greater calcite content (acting as nucleation sites) in the aqueous carbonated BOFS.