Oily sludge is one of the most significant solid wastes generated in the petroleum industry. It is a complex emulsion of various petroleum hydrocarbons (PHCs), water, heavy metals, and solid particles. Due to its hazardous nature and increased generation quantities around the world, the effective treatment of oily sludge has attracted widespread attention. In this review, the origin, characteristics, and environmental impacts of oily sludge were introduced. Many methods have been investigated for dealing with PHCs in oily sludge either through oil recovery or sludge disposal, but little attention has been paid to handle its various heavy metals. These methods were discussed by dividing them into oil recovery and sludge disposal approaches. It was recognized that no single specific process can be considered as a panacea since each method is associated with different advantages and limitations. Future efforts should focus on the improvement of current technologies and the combination of oil recovery with sludge disposal in order to comply with both resource reuse recommendations and environmental regulations. The comprehensive examination of oily sludge treatment methods will help researchers and practitioners to have a good understanding of both recent developments and future research directions.