The effect and mechanism of municipal sludge drying with slag-based modified material were revealed by the study of moisture content at different contents of modified material and curing times. The hydration products and microstructure of slag-based modified material and the dried sludge were characterized by using X-ray diffraction analysis, scanning electron microscopy and thermal analysis. The results showed that the moisture content of dried sludge reduced gradually with the contents of modified material and curing age. The drying effect of slag-based modified material was better than quicklime at the same conations. Microscopic experimental results indicated that insoluble calcium silicate hydrate gels and ettringite crystal were formed during the hydration process of slag-based modified materials at alkaline conation, transforming a lot of free water into crystalline water in order to reduce moisture content of sludge. Meanwhile, these hydration products filled the pores of sludge, inducing to a thorough from loose agglomerate structure system of original sludge to a firmly bonded structure with different phases. It is helpful to the further utilization of sludge.