[Objective] Rocky desertification and the massive accumulation of phosphogypsum are significant ecological management challenges in Southwest China. Because the physicochemical properties of phosphogypsum differ greatly from those of modified hydrogels, the characteristics of composite hydrogels modified with phosphogypsum and drinking water sludge and their effects on soil improvement require further investigation. Therefore, this paper integrates the resource utilization of phosphogypsum with the improvement of rocky desertified soil, providing a new technical pathway for the remediation of rocky desertified soils in Southwest China. [Methods] This study prepared four types of hydrogel materials modified with phosphogypsum and drinking water sludge, and determined their water retention, phosphorus slow-release capability, and soil and water conservation characteristics. Simulated soil erosion tests and plant pot experiments were conducted, and the effectiveness of these materials in soil improvement was evaluated by analyzing changes in soil nutrients and the growth conditions of ryegrass. [Results] (1) The water retention performance of the hydrogel significantly improved after modification with phosphogypsum and drinking water sludge. At 25 ℃, the water release time of the modified hydrogel increased to 1.67-1.89 times that of the unmodified hydrogel, the maximum water retention reached 29.29 g/g, and after mixing with soil, the 30-day water loss rate decreased from 99.73% to a minimum of 81.76%. This significantly slowed the evaporation of water in soil. (2) Hydrogels modified with phosphogypsum and drinking water sludge achieved slow phosphorus release, with the cumulative release rate of phosphorus decreasing by 5.65%-17.9% (over 18 days). (3) The soil and water conservation ability of the modified hydrogel significantly improved, with sand reduction rate, flow reduction rate, and water retention increment reaching 33.96%,58.68%, and 46.39 g/kg, respectively. (4) In addition, after adding the modified hydrogel, the organic matter, alkali-hydrolyzable nitrogen, available phosphorus, available potassium, and cation exchange capacity in the soil increased by up to 52.64%, 87.88%, 1 057.14%, 69.03%, and 84.62%, respectively. The fresh weight of the planted ryegrass reached 4 times that of the control group, and the bud length and root length increased by 38.1% and 4.1 times, respectively. [Conclusion] The modified hydrogel prepared in this paper has good water retention, fertilizer slow-release properties, and soil and water conservation characteristics, as well as soil improvement effects, providing theoretical support for the application of environmentally friendly modified hydrogel materials in soil improvement.