A method of producing fertilizer out of sludge, in which method sludge is heated with superheated steam for achieving hygienization to destroy pathogenic microorganisms. In the method, the sludge is heated to a temperature of 60 to 100° C. with superheated steam having a temperature of 200 to 600° C. to activate increasing of the amount of soluble carbon in the sludge and to restart biodegradation of the sludge by using non-pathogenic microorganisms still remaining in the sludge after the heating.