In order to realize the harmless treatment and resource utilization of municipal sludge, the effect of volatile-char interaction on the properties of sludge pyrolysis products was investigated using a two-stage pyrolysis reactor. The experimental results show that volatile-char interaction promotes the decomposition of organic compounds into small molecular gases, which increases the gas yield and reduces the liquid and oil yields. Under the experimental conditions, the volatile-char interaction increases the mass yields of H2, CO and CO2 to varying degrees, and the yield of H2 increases maximum by 55.7–114.5% compared to that without interaction. The effect of interaction on the composition of bio-oil occurs mainly at low temperature range of 400–600 ℃ by reducing the content of oxygen-containing compounds except for aldehydes/ketones. The physical and chemical structure of solid char changes dramatically with the interaction. The enhanced removal of O-containing groups occurs and the degree of aromaticity of the char is increased due to the strengthened dehydrogenation and polycondensation of hydrocarbons. Meanwhile, the transformation of non-hydroxyapatite phosphorus to hydroxyapatite phosphorus in solid phase products is greatly promoted at high temperature of 700–800 ℃, increasing the potential utilization of char as carbon-based phosphate fertilizer in agriculture.