We developed a novel mixed binder of MgO (magnesia) and supplementary cementitious materials that can solidify sediments contaminated with heavy metals as well as store CO2 through mineral carbonation reactions. The optimal MgO‐based binder consisted of MgO, lime (L), fly ash (FA), and blast furnace slag (BFS) with a formula of MgO0.5–(L0.1–(FA0.4BFS0.6)0.9)0.5. The binder exhibited a compressive strength of 11.9 MPa, which was similar to that of Portland cement. Sequential extraction of treated sediments showed that the stabilization capacity of the MgO‐based binder for heavy metals (Cu, Cd, Ni, Pb, and Zn) was two times higher than that of PC. Results also show that more than 50% of the stabilized heavy metals existed within very persistent solid phases that were not disintegrated during the final step of the sequential extraction procedure using a HNO3/HClO4/HF solution. The hydration products of MgO that contributed to strength development and metal stabilization included brucite (Mg(OH)2), magnesium–silicate–hydrates (M–S–H), and lansfordite (MgCO3 · 5 H2O). Lansfordite was a major carbonation product in the treated sediments. By use of thermogravimetric analyses, we found that 58 kg of CO2 could be sequestrated within the solidified sediment when a ton of dredged sediment was treated.