The present work demonstrated that secondary pulp/paper sludge powder, with a higher heating value of 18.3 MJ/kg on a dry basis, could be effectively converted into liquid oil products by direct liquefaction in hot-compressed water with and without catalyst. Treatments of secondary pulp/paper sludge in water at 250–380 °C for 15–120 min in the presence of N 2 atmosphere resulted in yields of water-soluble oils at 20–45 wt% and yields of heavy oils at 15–25 wt%, with higher heating values of 10–15 and >35 MJ/kg, respectively. The higher caloric values for the heavy oil products were accounted for by their compositions of long-chain carboxylic acids, heterocyclic nitrogen compounds and phenolic compounds and derivatives as evidenced by the gas chromatograph (GC)/MS measurements. The liquefaction product yields were significantly influenced by the liquefaction temperature, the residence time, the initial biomass concentration, catalysts and the liquefaction atmosphere (inert or reducing). Within the temperature range (250–380 °C) tested, the lowest temperature produced the highest yield of total oils (at 60 wt%), while the greatest yield of heavy oil (at about 24 wt%) was obtained at 350 °C. If the temperature was fixed at 280 °C, a greater yield of heavy oil (reaching as high as 25 wt% for 120 min) was obtained as the length of reaction time increased. Similarly, a higher initial biomass concentration produced a greater yield of heavy oil but a reduced yield of water-soluble oil. The presence of 0.1 M K 2CO 3 dramatically enhanced organic conversion, but suppressed the formation of both heavy oil and water-soluble oil. The use of the two alkaline earth metal catalysts, i.e., Ca(OH) 2 and Ba(OH) 2, did not alter organic conversion, but it catalyzed the formation of water-soluble oil and produced higher yields of total oil products. It was also demonstrated that the reducing atmosphere (i.e., H 2) in the liquefaction process promoted the heavy oil formation while suppressing the water-soluble oil formation. With the presence of 0.1 M Ca(OH) 2 and 2 MPa H 2, liquefaction of the sludge powder in water at 280 °C for 60 min produced a higher yield of heavy oil (26 wt%), almost two times as high as that in N 2 (13.6 wt%), resulting in a greater net energy efficiency. It was thus suggested that direct liquefaction of secondary pulp/paper sludge in hot-compressed water with Ca(OH) 2 catalyst and in the presence of H 2 could be an effective approach to recovering energy from the waste for production of liquid oil products.