Municipal solid waste incineration fly ash (MSWI FA) poses serious environmental concerns due to its high content of hazardous organics, heavy metals, and soluble salts. This study aimed to solidify the harmful components in MSWI FA by alkali activation and explore the influence of converter steel slag on the phase evolution. With the increase of curing time, the amount of C-(A)-S-H gel increased and its microstructure shifted to a high crystalline and crosslinked state, accompanied by the increase of Ca/Si ratio. The addition of steel slag was beneficial to the formation of C-(A)-S-H gel and enhanced its crystallinity and crosslinking degree. Compared with alkali-activated MSWI FA, NaCl and KCl content decreased more significantly with curing time and Friedel ’salts were found in the matrix modified by steel slag. The leaching toxicity of heavy metals in alkali-activated matrix was reduced as curing time increased. The increase of C-(A)-S-H gel content and changes of its microstructure were conducive to the stabilization of heavy metals and chlorides. The refinement of pore size and improvement of compressive strength contributed to the physical encapsulation of heavy metals and chlorides.