Disposal of water treatment sludge (WTS) has become an important issue of global environmental concern due to problems and costs. This study explored the feasibility of cold-bond methodology to produce an eco-friendly core–shell lightweight aggregate (LWA) from WTS, expanded perlite (EP), and cement. The effect of cement and WTS content on the properties of the LWA was studied. The findings revealed that the crushing strength, loose bulk density, 24-h water absorption, and 28-d water absorption of produced LWA ranged from 0.45 to 3.1 MPa, 1.05 to 1.25 g/cm3, 12.4 to 22%, and 22 to 27%, respectively. In addition, increasing the WTS content in the shell has a positive impact on the pH of the produced LWA. Furthermore, the SEM microstructure graphs revealed the efficient interference in the LWA particles between the cement–WTS composite and the perlite. The results also prove the possibility of using the produced LWA to produce structural lightweight concrete, with compressive strength, splitting tensile strength, and dry density of 24 MPa, 2.98 MPa, and 1840 kg/m3, respectively, with a consistent thermal conductivity of 0.72 W/m K and good acoustic insulation.Graphical abstract