Co-hydrothermal carbonization (Co-HTC) of sewage sludge (SS) and lignocellulosic biomass has been reported as a promising technology for SS pretreatment, in terms of sterilization, deodorization, and enhancing fuel properties. However, in current research, the aqueous phase from Co-HTC was generally dumped directly as a waste liquid, which was not conducive to the effective utilization of energy and environmental protection. Therefore, for the purpose of further improving the above process, Co-HTC of sewage sludge and water hyacinth (WH, a lignocellulosic biowaste) was employed in our study, coupling with aqueous phase recirculation during the Co-HTC process, aiming at harvesting value-added solid fuels and identifying the upgradation effects of aqueous phase recirculation on hydrochar fuel characteristics. The results demonstrated that excellent synergistic effects occurred during Co-HTC. Moreover, synergistic effects would be further enhanced during the aqueous phase recirculation process due to strengthened Maillard and Mannich reactions, contributing to superior experimental hydrochar yield, a higher heating value (HHV), energy yield, and a power consumption index compared with that of calculated values. The hydrochar from Co-HTC and the recirculation process showed lower ignition and burnout temperatures, facilitating the rapid release of heat during the combustion of hydrochar. Meanwhile, synergistic effects during Co-HTC and recirculation facilitated transforming the speciation of Cd and Pb from F1 and F2 fractions to F3 and F4 fractions, thereby reducing their direct ecotoxicity to the environment. The reaction mechanism during Co-HTC and the recirculation process was inferred by further characterizing components in the aqueous phase. In summary, these findings could provide referential information for the resource utilization of the aqueous phase during the Co-HTC process as well as scaling up the thermal utilization paths of SS and WH.