Aquaponics combines aquaculture with hydroponics by recirculating water in a closed loop. As an innovative environmental-friendly system, aquaponics is able to reuse available nutrient resource and minimize waste discharge. Current commercial aquaponics technologies only recycle liquid effluent but considerable amount of fish sludge is filtered out of the system as waste, and therefore, a great proportion of nutrients in the sludge has not re-utilized as resource. Recovering nutrients from fish sludge directly and reintroducing it into aquaponics as liquid fertilizer has become attractive because of environmental and economic benefits which enhance the sustainability of aquaponics. This article reviewed recent progress in aquaponic system with fish sludge management as resource, including the potential of recovering nutrients in fish sludge, methods for collection of fish sludge, and the nutrient recovery via the mineralization of fish sludge. The results indicate that the management of fish sludge can be optimized to ensure high efficiency of nutrient utilization in aquaponics. Effective collection and digestion of the fish sludge to generate nutrients are the key for successful nutrient recovery. The digestion of the concentrated sludge can be performed either in anaerobic reactors or aerobic reactors. Combining the collection of fish sludge with the conversion of solid nutrients in a single device is effective in achieving high nutrient recovery efficiency of aquaponic system. A modified biological aerated filter in the process is proposed for the filtration of fish sludge and the conversion of nutrients in aquaponics.