In response to the issues of large production volume, complex composition, and difficulties in the disposal of oily sludge in China, this paper presents a novel technical approach that involves blending and burning oily sludge in large coal-fired boilers. First, a numerical simulation was conducted to evaluate the co-burning scheme of oily sludge. The results showed that blending did not significantly alter the temperature field distribution within the boiler, except for a slight increase observed in the main combustion zone. When a portion of the fuel was replaced with oily sludge instead of pulverized coal, the combustion temperature in the main zone rose due to the fast ignition and high combustion completeness of oily sludge, resulting in a reduction of nitrogen oxides (NOx) emissions. Additionally, burning oily sludge led to a decrease in the carbon content of the fly ash, thereby improving boiler efficiency. Secondly, this technical approach was implemented in practice on a 330 MW boiler. The measurement results demonstrated that under a 120 MW load, the blending and burning of sludge reduced the NOx emission value from 425 mg/Nm3 to 376 mg/Nm3 and increased boiler efficiency from 91.90% to 92.13%. Therefore, the blending approach offers significant economic and environmental benefits and promising prospects for widespread applications.