A promising lead-containing waste recycling method, with sulfur conservation and reductive sulfur-fixing co-smelting process (RSFCS), is proposed. This work investigated the PbSO4 reduction equilibrium composition, phase conversions, and microscopic transformation mechanisms during the RSFCS process at different temperatures, times, and CO-CO2 mixtures using thermodynamic modeling, thermogravimetric analysis, x-ray diffraction, and SEM-EDS analysis techniques. At the same time, the gaseous products were collected and analyzed. The results showed that three reduction paths existed: (1) PbSO4→CO/CO2 PbO·PbSO4+SO2→CO/CO2 2PbO·PbSO4+SO2→CO/CO2 4PbO·PbSO4+SO2→CO/CO2 PbO+SO2→CO/CO2 Pb; (2) PbSO4→CO/CO2 PbS; (3) PbSO4 → PbO·PbSO4+SO3 → 2PbO·PbSO4+SO3 → 4PbO·PbSO4+SO3 → PbO+SO3. Reduction temperature and CO concentration were determined as major factors in the PbSO4 reduction. In a relatively weak reductive atmosphere and at low temperature, xPbO·PbSO4 (x = 1, 2, 4), PbO, Pb, and SO2 were the major products. When temperature and the CO concentration increased, PbSO4 was selectively reduced to PbS, with sulfur in the PbSO4 fixed in PbS, instead of emitting SO2/SO3.