Paper mill sludge (PMS) is a high-volume waste of the pulppapermaking industry, containing cellulose fibers. This paper introduces cellulose nanofibers extracted from PMS (CNFs PMS ) and their application in paper coatings using a wire-wound coating method to enhance internal and optical properties of paper. Three factors were investigated: (i) CNFs PMS amount, (ii) number of layers, and (iii) surface treatment via a 4 × 2 × 2 factorial design. The experimental responses were tracked by fundamentally important internal properties including porosity, air permeability, thickness, roughness, and optical properties of brightness, gloss, and CIE L*a*b* color coordination. The results showed that CNF PMS enhances porosity to 91 mL/ min, permeability to 0.5 × 10 −3 μm 2 , and gloss to 29.5 at 1 wt % CNFs PMS applied in two layers with 500 pli calendering. Roughness improves to 2 μm at all levels of CNFs PMS applied to two layers with 500 calendering. CNFs PMS prevents a decrease in brightness and improves lightness, suggesting more colors can be produced in printing applications. The utilization of PMS for papermaking applications can add value to these underutilized residues and open a new revenue stream by reusing it as a high-value material.