With the booming construction of sewage treatment plants aiming at environmental protection, China has to face an emerging urgent task to address the sludge treatment and disposal problem. However there is a big controversy in China about the sludge treatment and disposal strategies. Some scientists suggest incinerating, while others insist on landfilling. In this paper, from the perspective of sustainable development and cyclic economy, a detailed analysis of nutrients cycle mainly related to nitrogen and phosphate before and after industrialization was made and a view that sludge should go back to soils to re-establish a sound nutrients cycle was put forward. Then the feasibility for sludge recycle to soils was discussed and some land application methods for sludge were introduced. At last, a successful case of producing compounded fertilizer from dewatered sludge in Northeast China was described in detail.