Microwave-assisted wet torrefaction was adopted in this study for co-processing textile sludge (TS) and biowaste. Key operating parameters, including different temperatures (120–180 °C) and reaction times (10–30 min), for the torrefaction of legally recyclable TS (R-0906 in Taiwan) were evaluated. Furthermore, TS was blended with six widely produced types of lignocellulose biowaste at different blending ratios for improving the biochar quality and combustion characteristics. The results indicated that the optimal temperature and reaction time for TS torrefaction were 180 °C and 20 min, respectively, beyond which the fixed carbon content and higher heating values (HHVs) of biochar increased from 1.7% to 5.1% and 13.0–18.7 MJ/kg, respectively. However, biochar produced through the torrefaction of TS and macadamia husk with a blending ratio of 30/70 (db%) exhibited the highest fixed carbon content (29.8%) and HHV (19.7 MJ/kg) among the six tested lignocellulose biowaste samples with the atomic H/C and O/C ratios close to those of peat. The thermal stability, activation energy, frequency factor, and ignition and combustion temperatures of the biochar produced through microwave-assisted wet torrefaction co-processing were higher than those produced using raw TS or biowaste. The energy return on investment of the biochar system reached 10.9. Greenhouse gas emissions can be decreased by 57.5% if biochar is used as a bituminous coal substitute. Therefore, microwave-assisted wet torrefaction is a sustainable approach for mitigating the disposal problems of TS and lignocellulose biowaste as well as improving the energy performance and environmental friendliness of biochar-to-energy systems. Besides, the protein and carbohydrate contents in the supernatant of TS co-torrefied with biowaste at different blending ratios increased by 1.0–4.1 and 1.2–5.9 times, respectively. These contents can be recycled back to the activated sludge unit as a nutrient source. Overall, the microwave-assisted wet torrefaction process is green and economically beneficial.