A study was conducted to evaluate the effects of sludge (industrial and residential) on seed germination and growth performance of Acacia auriculiformis seedlings at the nursery of Institute of Forestry and Environmental Sciences, Chittagong University (IFESCU), Bangladesh. Before sowing of the seeds, different combinations of sludge were incorporated with the nutrient-deficient natural forest soils. Seed germination and growth parameters of the seedlings (shoot and root length, collar diameter, fresh and dry weight of shoot, and root and total dry biomass) were recorded after one, two and three months of seed sowing. Physio-chemical parameters (pH, organic carbon, nitrogen, phosphorus, and potassium) and heavy metals (chromium, nickel, manganese, cadmium and zinc) of each treatment were also analyzed before sowing of seeds and after harvesting of seedlings. Results show that the seed germination percentage and the seedling growth parameters varied significantly in the soil added with sludge in comparison to control. The highest germination percentage (90%) was observed in the treatment of soil with residential sludge of 2:1 compared to control. The highest growth and biomass of the seedlings as well as the maximum percentage of organic carbon and nutrients (N, P and K) were also recorded in the same combination. Soil added with industrial sludge had a higher concentration of heavy metal than that of residential sludge. The highest concentrations of heavy metals were found in soil added with industrial sludge of 1:1. It is recommended that soil added with residential sludge of 2:1 provide good condition for better seed germination and growth of A. auriculiformis seedlings in degraded forest soil.