The invention relates to a sludge treatment process based on a hydrothermal modification technology. The sludge treatment process is carried out by comprising the following steps of: (1) temporarily storing the sludge which is subjected to mechanical dehydration and has the water content of 70-85% to a pretreatment unit and deodorizing the sludge; (2) introducing to a homogeneous device, fully mixing and homogenizing, introducing the homogenized sludge to a slurrying device, introducing the slurried sludge to a hydrothermal reactor for hydrothermal reaction, and introducing the hydrothermal sludge to a flash evaporator for decompression and flash evaporation; (3) cooling to 35-45 DEG C by using a cooler, then introducing to a high-pressure diaphragm pressure filter for pressure filtering and dehydration to obtain a dehydrated mud cake with the solid content of 35-45% and dehydrated filtrate; (4) introducing the dehydrated filtrate to an intermediate temperature anaerobic reactor, wherein the residence time is for 5.5-7.5d, the inlet water temperature is controlled below 40 DEG C, and the anaerobic reaction temperature is 30-40 DEG C; and (5) preparing a biomass fuel rod by using the dehydrated mud cake, and introducing the biomass fuel rod to a boiler to provide steam for the hydrothermal reactor and the flash evaporator. The sludge treatment process has the advantages of goodtreatment effect, obvious volume reduction effect, high harmless degree, recycling of methane, good economic benefit and the like.