Moisture content is an important factor affecting the geotechnical properties of solidified municipal sludge (MMS). Typical municipal sludge in China was chosen to investigate the effects of initial moisture content (defined as w0) on geotechnical properties of MMS solidified by self-developed CERSM solidifying agent. In addition, the microstructure changes of solidified sludge samples in this study were explored with scanning electron microscopy and mercury intrusion porosimetry. Mechanical experiment results showed that the unconfined compressive strength, cohesion, and internal friction angle of the MMS increased with the decrease in initial moisture content, but the permeability coefficient changed oppositely. The permeability coefficient of solidified sludge samples was between 10−8 and 10−10 cm/s. But after the drying-saturated process, the permeability coefficient of MMS can be increased up to 4 times, mainly due to the formation of a considerable number of microconnected pores and microcracks in the process of drying. The research results are of great significance to the safe disposal and utilization of municipal sewage sludge in China.