Sludge treatment and disposal is one of the focus points in the waste treatment technology research due to the fact that sewage sludge is a form of pollution. One of the promising methods of sewage sludge treatment, considering its maximum sludge reduction and short processing time, is incineration. However, the usage of sewage sludge as fuel in incinerator is hindered by its high water content and high nitrogen content. A hydrothermal process for producing solid fuel from sewage sludge is developed by using saturated steam at 160–200 °C and about 60 min holding time. It was shown that the product has improved dehydrability, but at the same time exhibiting higher solubility in the water, resulting in slightly lower calorific value due to the loss of dissolved solids, which have significant calorific value; therefore, an optimum operating condition is required to improve the dehydrability of sludge without reducing its solid content and calorific value. In the term of sewage odor, it was shown that after the hydrothermal treatment the sulfur-containing compound concentration was decreased, the same with the total odor intensity in the solid product. On the other hand, the odor intensity in the liquid and gaseous products were increased, suggesting the transfer of these compounds to the liquid and gaseous parts. During the combustion experiment, it was shown that the hydrothermally treated sludge emits lower NO emission compared to the raw sludge, promoting its possibility to be used in incinerator as direct or co-fuel without resulting in secondary pollution.