Through study of the relevant present literatures about biological fuel produced by sludge and straw, a new fuel technology and its production line was proposed. The structure design was focused on a sludge and straw granulation drying machine and its critical components. Sludge and straw granulation technique were adopted by this design method. Compared with the traditional equipments, it has the characteristics of simple structure, high integration. The problems were resolved whose sludge drying of high energy consumption, low efficiency, long drying time and the device covering a bigger area.