Iron salts are widely used in municipal infrastructure to treat drinking water, prevent the corrosion of sewer lines and enhance phosphorus/nitrogen removal. The added iron salts deposit in sludge, leading to an increase in the cost of sludge disposal. Here, we demonstrated the feasibility of recycling magnetite nanoparticles (MNPs) produced from Fe-rich sludge under anaerobic conditions with indigenous microorganisms. The genus Geobacter was found to play the primary role in MNP synthesis. The produced MNPs were spherical with a size ranging from 12 to 24 nm. Compared to commercialized MNPs, the extracellular polysaccharides protected their surficial Fe2+ from being oxidized. The biosynthesized MNPs had a catalytic performance similar to that of commercialized MNPs but with high reusability after multiple cycles. These results demonstrate that the biosynthesis of MNPs is a novel and applicable way to recycle value-added products from Fe-rich sludge.