Both coal-derived sludge and low-rank coal possess significant potential for resource utilization and have garnered considerable attention in recent years. The TG−DTG analysis method showed that the thermal conversion components of coal-derived sludge tended to migrate to coal and interacted with low-rank coal. The dewatering effect of low-rank coal on coal-derived sludge was investigated using the sludge-specific resistance to filtration (SRF) method. The results showed that the addition of coal promoted the transformation of interstitial water and surface water of sludge, especially the interstitial water to free water. Dewatering and deoxidation of low-rank coal and coal-derived sludge were realized by decarboxylation and C−O bond cleavage on benzene during hydrothermal co-treatment at 140−220 ℃. The average water content of hydrochar was 3.96 % after hydrothermal co-treatment, and its calorific value increased from 19.77 MJ/kg to 21.74 MJ/kg after hydrothermal co-treatment. Hydrothermal oil was produced during hydrothermal co-treatment. GC−MS analysis showed that the contents of N and S increased in the hydrothermal oil with the increase of hydrothermal temperature, indicating that the hydrothermal co-treatment can remove the impurity elements (such as N and S) contained in coal-derived sludge and low-rank coal. The pyrolysis experiments of the hydrochar at 600–900 ℃ showed that the hydrochar produced less pyrolysis gas and emitted less CO2 than the result without hydrothermal co-treatment. This study provided an effective strategy for the treatment and resource utilization of sludge and coal.