High mud content in the sand has a negative impact on cement mortar but there is little research on Alkali-activated slag (AAS) mortar. In order to explore the impacts of mud content in the sand on the performance of AAS mortar, this paper used sand that contains silt, clay, and a mixture of silt and clay; tested the setting time of AAS with different mud contents of 0%, 2%, 4%, 6%, 8%, and 10%; and measured the unconfined compressive strength and beam flexural strength of 3 d, 7 d, and 28 d AAS mortar specimens. The microstructure of AAS mortar with different kinds of mud was observed by scanning electron microscope (SEM), the elemental composition of the hydration product was tested by energy dispersive spectroscopy (EDS), and the AAS interaction mechanism with different kinds of mud was analyzed. The main conclusions are: the higher the mud content in the sand, the shorter the initial setting time and the longer the final setting time of AAS, mainly because the mud in the sand affects the hydration process; mud content above 4% causes a rapid decrease in the compressive and flexural strengths of AAS mortar, mainly because the mud affects the hydration process and hinders the bonding of the hydration product with the sand. When there is no mud in the sand, the main hydration product of AAS is dense calcium-alumina-silicate-hydrate (C-A-S-H) gel. When the sand contains silt, the hydration product of AAS is loose C-A-S-H gel. When the sand contains clay, the hydration products of AAS contain C-A-S-H gel and a small amount of sodium-aluminum-silicate-hydrate (N-A-S-H), and needle-like crystals. Loose gel and crystals have a negative effect on the AAS mortar strength.