The sludge extract obtained from degradation solvent extraction exhibits high carbon content, low oxygen content, and ash-free characteristics, making it an ideal fuel due to its excellent performance. In this study, the pyrolysis process of the extract was systematically studied by combining GC-MS experiment with ReaxFF molecular dynamics simulation. The comparison between GC-MS experimental results and ReaxFF-MD simulation shows a high degree of similarity, thus confirming the accuracy of the simulation. This study identified 2000 K as the turning temperature between initial pyrolysis and secondary pyrolysis. In the temperature range of 1200–2000 K, the extract mainly undergoes primary pyrolysis, while in the temperature range of 2000–3000 K, the secondary reaction is remarkable, which is characterized by the further decomposition of tar free radicals and the condensation reaction involving tar free radicals or char. The analysis of typical gas content shows that H2, CO, NH3 and HCN are by-products of the secondary reaction of tar, and there are a lot of reducing gases at high temperature, such as H2, CO and CH4. Finally, the migration patterns of carbon, hydrogen, oxygen and nitrogen are discussed. It is worth noting that hydrogen and nitrogen mainly migrate to the pyrolysis gas phase. This not only laid a foundation for the separation of nitrogen and hydrogen in the future, but also triggered thinking about the potential of “low-carbon emission resource” in future research work. When compared to raw municipal sludge, the initial pyrolysis temperature of municipal sludge extract is much lower, and its pyrolysis process becomes faster. The advantages of reactive gas components indicate that it is more reactive. This variance results in a distinct product distribution and pyrolysis mechanism.