Capture of elemental mercury (Hg0) from coal combustion flue gas by sorbent injection is still associated with challenges, such as high-cost starting materials, difficulty in separation/reuse of sorbent and SO2 poisoning, in its large-scale application. This work highlighted a facile method to prepare a cost-effective and magnetically responsive mercury sorbent by pyrolysis of FeSO4-flocculated sludge and rice straw. Fe3O4, Fe2O3 and short-chain polysulfide in the sorbent were proven to be the main active sites for Hg0 adsorption/oxidation. Appropriate addition of rice straw into sludge boosted the development of porous structure of the sorbent, which facilitated the migration of Hg0 onto the absorption sites. With straw/sludge mixing ratio of 1:1 and pyrolysis temperature of 700 °C, the obtained SR1T7 exhibited good Hg0 capture ability under harsh gas conditions (1000 ppm SO2 and 3% H2O). At 125 °C, the Hg0 adsorption capacity and average adsorption rate were estimated to be 9.63 mg/g and 1.96 × 10−3 mg/(g⋅min), respectively. To extend its service life, the spent SR1T7 could be collected by magnetic separation, followed by thermal regeneration. SR1T7 might be a prospective alternative to traditional carbon-based mercury sorbent, due to its excellent Hg0 capture ability, good recyclability, decent SO2 resistance and low cost.