The effects of a sludge-based additive (mainly composed of calcium phosphate) on the retention of potassium in bottom ash and ash melting characteristics during rice straw (RS) combustion were studied with a bench-scale tube furnace reactor at the reaction temperatures of 600, 700, 800, and 900 °C. The potassium content in bottom ash and ash composition characteristics were analyzed using powder X-ray diffraction (XRD), X-ray fluorescence spectroscopy (XRF), and scanning electron microscopy with energy dispersive spectroscopy (SEM-EDS). The results showed that the addition of sludge-based additive into rice straw at a mass fraction of 2.5–7.5% could effectively improve the potassium fixation rate and retain potassium in the bottom ash during combustion process by the formation of potassium aluminosilicates and K–Ca–P compounds. The ash melting characteristic was enhanced and the sintering of bottom ash was prevented by the addition of sludge-based additive. For instance, the soft temperature (ST) of RS was enhanced by 238 °C for the case of addition of 5.0% sludge-based additive into RS. In general, addition of sludge-based additive into RS with high potassium and chlorine contents was predicted to significantly increase the retention capacity of potassium as well as improve the melting characteristics of bottom ash.