The proper treatment and utilization of oily sludge (OS) and incineration fly ash (IFA) remains a significant challenge due to their hazardous nature. To attain effective recovery of petroleum hydrocarbons and synergistic disposal, this study investigated the co-pyrolysis of OS and IFA, resulting in successful energy recovery, CO2 mitigation, and heavy metal immobilization. Results revealed that the peak ratio of light oil to heavy oil fractions reached 179.42% with 20 wt% IFA addition, accompanied by the highest aromatic hydrocarbons selectivity of 30.72% and the lowest coke yield of 106.13 mg/g OS under the optimal temperature of 600 °C. In-depth analysis indicated that IFA inhibited the poly-condensation of macromolecular PAHs and promoted their cracking into light aromatic hydrocarbons. The addition of 50 wt% IFA significantly increased H2 yield (21.02 L/kg OS to 60.95 L/kg OS) and facilitated CO2 sequestration due to its higher content of Ca-bearing minerals. Moreover, high IFA ratios promoted the reduction of Fe species in OS to a low-valence state. Heavy metals in co-pyrolysis char were well immobilized into stable fractions with lower environmental risks. This work highlights the potential of co-pyrolysis as a viable approach for simultaneous disposal of multiple hazardous wastes and offers new insights for their utilization.