The work aimed to classify a raw brown colour fly ash (RFA) into coarse grey fly ash (GFA) and fine brown fly ash (BFA) using a laboratory air classifier and to study the properties of grey fly ash-based blended cement. Portland cement (OPC) was partially replaced with 10–30% GFA by mass at 5% intervals to make blended cement. The physical and mechanical properties were determined as per Bureau of Indian Standards (BIS). The incorporation of GFA in cement mixes decreases the specific gravity, fineness, consistency, volume expansion and drying shrinkage while increases the setting time and flow-ability. The compressive strength of blended cement was observed lower than that of OPC at all ages, but the rate of strength development increases with the age. The replacement level up to 20% meets the BIS strength requirement of 33 MPa at 28 d for fly ash-based blended cement. The hydration studies were done using Isothermal Conduction Calorimetry (ICC) at 27 °C. The total heat of hydration was observed to decrease with the increasing GFA content. The microstructural characterisation of hardened cement pastes after 60 d using XRD, FTIR and SEM-EDS revealed the variations in mineralogical, structural and morphological properties.