Sewage sludge (SS) is widely used as a soil conditioner in agricultural soil due to its high content of organic matter and nutrients. In addition, inoculants based on soil microorganisms, such as cyanobacteria, are being applied successfully in soil restoration to improve soil stability and fertility in agriculture. However, the combination of SS and cyanobacteria inoculation is an unexplored application that may be highly beneficial to soil. In this outdoor experiment, we studied the ability of cyanobacteria inoculum to grow on degraded soil amended with different concentrations of composted SS, and examined the effects of both SS concentration and cyanobacteria application on carbon gain and soil stability. We also explored the feasibility of using cyanobacteria for immobilizing salts in SS-amended soil. Our results showed that cyanobacteria growth increased in the soil amended with the lowest SS concentration tested (5 t ha−1, on soil 2 cm deep), as shown by its higher chlorophyll a content and associated deeper spectral absorption peak at 680 nm. At higher SS concentrations, inoculum growth decreased, which was attributed to competition of the inoculated cyanobacteria with the native SS bacterial community. However, SS significantly enhanced soil organic carbon gain and tightly-bound exopolysaccharide content. Cyanobacteria inoculation significantly improved soil stability and reduced soil’s wind erodibility. Moreover, it led to a decrease in the lixiviate electrical conductivity of salt-contaminated soils, indicating its potential for salt immobilization and soil bioremediation. Therefore, cyanobacteria inoculation, along with adequately dosed SS surface application, is an efficient strategy for improving carbon gain and surface stability in dryland agricultural soil.