The utilization of sludge incineration ash (SIA) in concrete is often limited by mechanical deterioration and uncertain environmental stability. This study investigated SIA as a fine aggregate replacement, optimizing its use through systematic mixture design. Results showed that an optimal mix (F23) achieved a 28-day compressive strength of 41.8 MPa, 7.2% higher than the control and meeting C40 standards. This enhancement stems from the micro-filling effect that densifies the cement matrix, though excessive SIA impairs workability. Long-term environmental assessment via acid rain leaching, chloride immersion, and freeze–thaw cycling confirmed excellent heavy metal immobilization. Cu, Ni, and Cd remained undetectable, while Zn and Cr showed negligible release. This study confirms that 5% SIA replacement serves as a promising, safe strategy for sustainable concrete production, offering a scientific basis for the high-value utilization of incineration ash.