Anaerobic digestion (AD) of municipal wastewater sludges produces valuable solid digestate and biogas. Biogas is a source of clean energy and enhancement of its production has been of recent interest for increased electricity generation, among other products. The objective of this study was the development of a novel municipal sludge-derived biochar and its application in a municipal wastewater AD system to increase the biogas production rate. Thickened waste-activated sludge (TWAS) samples were collected from the cold-region municipal wastewater treatment plant and used to synthesize biochar applied in the simulation of AD processes using laboratory-scale reactors. The TWAS-derived biochar was synthesized using the commonly used furnace pyrolysis (sludge-based biochar, SBC), and more novel microwave pyrolysis including phosphoric acid as a microwave activator (activated sludge-based biochar, ASBC). The microwave pyrolysis conditions were optimized using a computational fluid dynamics (CFD) technique. In addition, various commercially available carbon-based additives were assessed for their impacts on the AD process including activated carbon, wood-derived biochar, and forest residue-derived biochar. Results showed that the ASBC increased the cumulative methane production by 50% (333 mL/g VS) versus the control sample (221 mL/g VS) after 30 d. The ASBC showed higher surface area, electrical conductivity, and metal contents versus the other biochars which boosted the AD microbial community growth leading to higher organic matter conversion into biogas. In the ASBC-amended digesters, the bacterial phylum Bacteroidota, which contains a major genus of the dgA-11-gut-group, exhibited a synergy between organic substrate fermentation and volatile fatty acid production, resulting in enhanced biogas production. The TWAS biochar demonstrated promising performance in enhancing the AD process fostering energy and resource self-sufficiency at municipal wastewater treatment plants. This smart sludge management aligns well with sustainable waste management practices and clean energy production strategies, especially considering that the biochar was sourced from a readily available continuous waste-product stream.