Masonry blocks are usually made of Portland cement and cured by steam. This study explores the possibility of making masonry blocks using steel slag as binder and carbon dioxide as curing activator. By carbonation activation of steel slag blocks, carbon dioxide can be permanently sequestered in steel slag as calcium carbonates, leading to stronger and more durable construction blocks. In this paper, carbonated steel slag paste was first evaluated by thermogravimetry, derivative thermogravimetry, X-ray diffraction, carbon uptake, strength development and leaching tests. Based on the preliminary results, the full-size masonry blocks were fabricated using steel slag as the binder and granite as the aggregates. The physical properties and durability of full-size steel slag masonry blocks were then examined through their density, water absorption, moisture content, compressive strength and fire resistance. An economic analysis was performed and a carbon dioxide utilization capacity was estimated. This study demonstrates that production of steel slag masonry blocks by carbonation is an economically feasible way to utilize carbon dioxide.