With the increasing production of municipal sewage sludge (MSS) worldwide, the development of efficient and sustainable strategies for its management is crucial. Pyrolysis of MSS offers several benefits, including volume reduction, pathogen elimination, and energy recovery through the production of biochar, syngas, and bio-oil. However, the process can be limited by the composition of the MSS, which can affect the quality of the biochar. Co-pyrolysis has emerged as a promising solution for the sustainable management of MSS, reducing the toxicity of biochar and improving its physical and chemical properties to expand its potential applications. This review discusses the status of MSS as a feedstock for biochar production. It describes the types and properties of various co-substrates grouped according to European biochar certification requirements, including those from forestry and wood processing, agriculture, food processing residues, recycling, anaerobic digestion, and other sources. In addition, the review addresses the optimization of co-pyrolysis conditions, including the type of furnace, mixing ratio of MSS and co-substrate, co-pyrolysis temperature, residence time, heating rate, type of inert gas, and flow rate. This overview shows the potential of different biomass types for the upgrading of MSS biochar and provides a basis for research into new co-substrates. This approach not only mitigates the environmental impact of MSS but also contributes to the wider goal of achieving a circular economy in MSS management.