This study investigated the mechanism of modified sludge coal water slurry (MSCWS). Oxygen-containing functional groups in the sludge formed polar bonds with water, which restricted the slurrying performance and reduced the adsorption of additive on the coal surface. The flocculent structure of the sludge fixed the water in the slurry, which was not conducive to the fluidity of the sludge coal water slurry (SCWS). After an alkaline reagent was used to modify the sludge, the flocculent structure and polar functional groups were destroyed, which caused dense surface structures and released water molecules from polar bonds. In the MSCWS, the adsorption efficiency of the additive was improved because of the coverage of the polar groups and pores on the coal surface by the sludge. The stability of the slurry was enhanced due to the formation of a unique 3D network structure between the particles. After modification, the slurry concentration was increased from 55.73% to 58.75%, the MSCWS could flow continuously, and its stability was significantly improved.