This study investigated the oily sludge water loss and oil uptake phenomenon during the fry‐drying process. A cylindrical sample of oily sludge was added to the preheated spent lubricating oil of vehicle. A diffusion model and a first‐order kinetic model were proposed to predict the water and oil content, respectively, of the oily sludge sample. The drying rate and oil content of the sample increased with the increase in the temperature of the frying oil and the initial water content of the sample, as well as with the decrease in the sample diameter. When the initial water content of the sample decreased from 0.4093 to 0.3512 g/g and 0.3081 g/g, the final oil content decreased by 12.24 and 20.11%, respectively. The accuracy and universality of both models were evaluated by average relative deviation (ARD) and maximum relative deviation (MRD) under 10 experimental conditions. The ARD and MRD of the sample water content were 4.72 and 8.66%, respectively, whereas those of the oil content were 6.56 and 8.75%, respectively. © 2014 American Institute of Chemical Engineers Environ Prog, 2014 34: 681–688, 2015