Recalcitrant dyes found in textile wastewater represent a threat for sustainable textile production due to their resistance to conventional treatments. This study assessed an alternative co-composting system for the treatment of recalcitrant textile dyes where textile industrial sludge, sewage wastewater, or sewage sludge were used as microbial compost inocula. The biodegradation efficiency of bioreactor trials and compost quality of the co-composting system were assessed by visible spectrophotometry and by a phytotoxicity test. The co-composting system (dry weight (dw) basis) consisted of 200 g of restaurant organic residues + 200 g sewage sludge (or 100 mL sewage wastewater, or 200 g textile sludge) + 100 mL of a 10%dye solution (Reactive Red 195, or Synolon Brown, or Orange Remazol, or Yellow Synozol, or Reactive Orange 122, or Reactive Black 5). After 60 days of composting, all dyes were biodegraded according to spectrophotometric data, with efficiency varying from 97.2 to 99.9%. Inoculum efficiency ranking was textile sludge > sewage sludge > sewage wastewater. Regarding compost quality, a phytotoxicity study with lettuce showed no toxicity effect. Thus, co-composting can be a low-cost and efficient method for recalcitrant textile dye biodegradation and for managing textile sludge in terms of waste recycling, contributing to environmental sustainability.