The United Nations proposed the Sustainable Development Goals with the aim to make human settlements in cities resilient and sustainable. The excessive discharge of urban waste including sludge and garden waste can pollute groundwater and lead to the emission of greenhouse gases (e.g., CH4). The proper recycling of urban waste is essential for responsible consumption and production, reducing environmental pollution and addressing climate change issues. This study aimed to prepare biochar with high adsorption amounts of iodine using urban sludge and peach wood from garden waste. The study was conducted to examine the variations in the mass ratio between urban sludge and peach wood (2/1, 1/1, and 1/2) as well as pyrolysis temperatures (300 °C, 500 °C, and 700 °C) on the carbon yield and adsorption capacities of biochar. Scanning electron microscopy, Brunauer–Emmett–Teller analysis, Fourier transform infrared spectrometry, powder X-ray diffraction, and elemental analysis were used to characterize the biochar produced at different pyrolysis temperatures and mass ratios. The results indicate that the carbon yield of biochar was found to be the highest (>60%) at a pyrolysis temperature of 300 °C across different pyrolysis temperatures. The absorbed amounts of iodine in the aqueous solution ranged from 86 to 223 mg g−1 at a mass ratio of 1:1 between urban sludge and peach wood, which were comparably higher than those observed in other mass ratios. This study advances water treatment by offering a cost-effective method by using biochar derived from the processing of urban sludge and garden waste.