Wastewater biological nutrient removal (BNR) by short-cut nitrification-denitrification (SCND) and denitrifying phosphorus removal via nitrite (DPRN) has several advantages, such as organic carbon source saving. In this paper, a new method, i.e., by using waste activated sludge alkaline fermentation liquid as BNR carbon source, for simultaneously improving SCND and DPRN was reported. First, the performance of SCND and DPRN with sludge fermentation liquid as carbon source was compared with acetic acid, which was commonly used in literatures. Sludge fermentation liquid showed much higher nitrite accumulation during aerobic nitrification than acetic acid (81.8% versus 40.9%), and the former had significant anoxic denitrification and phosphorus uptake. The soluble phosphorus and total nitrogen removal efficiencies with sludge fermentation liquid were much higher than with acetic acid (97.6% against 73.4% and 98.7% versus 79.2%). Then the mechanisms for sludge fermentation liquid showed higher SCND and DPRN than acetic acid were investigated from the aspects of wastewater composition, microorganisms assayed by 16S rRNA gene clone library, and fluorescence in situ hybridization. More NO(2)(-)-N accumulated by the use of sludge fermentation liquid was attributed to be more humic acids in the influent, which inhibited nitrite oxidizing bacteria (NOB) more serious than ammonia oxidizing bacteria (AOB), and more AOB but less NOB were observed in the BNR system. The reasons for sludge fermentation liquid BNR system exhibiting greater short-cut denitrifying phosphorus removal were that there were less glycogen accumulating organisms and more phosphorus accumulating organisms and anoxic denitrifying phosphorus removal bacteria with higher nitrite reductase activity.