Sludge-based activated carbon (SAC) was prepared from paper mill sewage sludge by physical activation with steam for wastewater treatment in this study. The effects of preparation variables, including carbonization temperature, carbonization time, activation temperature and activation time, on iodine number and yield were investigated through orthogonal experiments. The influences of washing by deionized water and acid on the characteristics and adsorption capacities of SAC for phosphate, methylene blue and reactive red 24 were also studied. The results indicated that the optimal preparation conditions were: carbonization temperature of 350 °C, carbonization time of 40 min, activation temperature of 800 °C and activation time of 20 min. The characteristics and adsorption capacities of SAC were obviously different before and after washing, especially by acid. The surface area was improved and adsorption capacities for dyes increased after washing, while adsorption capacity for phosphate decreased. The maximum adsorption capacities provided strong evidence of the potential of SAC as an alternative adsorbent for wastewater treatment.