Fly ash (FA) is promising for environmental remediation, but how to modify the FA with high remediation efficiency through an environmentally friendly and low-cost modification method is scare. A modified FA (MFA) was prepared through a one-step hydrothermal modification with Ca(OH)2 and KH2PO4. Results indicated that irregular agglomerates occurred on the surface of the MFA and that the specific surface area increased by 1.94 times compared to that of FA. Compared to FA, glassy compositions in MFA were destroyed and amorphous Si/Al and alkaline aluminosilicate gels were formed. The soil application of 0.2–0.6% MFA significantly increased soil pH by 0.23–0.86 units compared to FA and decreased available lead (Pb) and copper (Cu) by 25–97.1% and 13.5–75%, respectively. MFA significantly decreased exchangeable Pb and Cu by 12.5–32% and 11.4–35.2%, respectively, compared to FA. This may be due to the high pH and specific surface area of MFA, which promoted to the formation of amorphous Si/Al, metal–phosphate precipitation, and complexation with functional groups. In addition, MFA slightly increased the biomass of shoots and roots and decreased the uptake of Pb and Cu by ryegrass. This study provides a new modification method for the utilization of FA in the heavy metal-contaminated soils.