<p>The management and disposal of sludge remain a pressing challenge in municipal wastewater treatment plants. Converting sludge into biochar represents a promising pathway for waste reduction and resource recovery. However, the existing literature on performance enhancement methods and characterization techniques of biochar is rather scattered and lacks systematic integration. This review aims to provide a comprehensive and up-to-date analysis of sludge-based biochar, focusing on its preparation, activation, modification, and post-treatment strategies. Besides, key characterization approaches were systematically discussed, including surface area and porosity, ash content, acidity and basicity, elemental composition, and spectroscopic techniques. This work offers a theoretical foundation and technical guidance for the application of biochar, with significant implications under the “carbon peak” and “carbon neutrality” framework.</p>