Al₂O₃ montmorillonite based Ni Catalysts have been prepared and characterized from the point of view of porosity and structure by N₂ adsorption-desorption. In the present study, the catalytic activity of catalyst was studied over Al₂O₃ pillared montmorillonite based Ni catalyst. The effect of reaction temperature (300-450^oC), hydrogen flow rate of (0.5-2.5 cm³/det) and catalyst weight of (0.25 - 1.25 gram) was studied by petroleum sludge hydrocracking. The experimental data shows the Al₂O₃ pillared montmorillonite successfully increase total pore volume and surface area specific from their initial montmorillonite features. The result shows that the catalytic activity of Al₂O₃ pilared montmorillonite is more active than parent monmorillonite. It is also found that the catalyst Ni loaded on Al-pillared monmorillonite can increase the catalytic activity of petroleum sludge hydrocracking. The optimum condition of petroleum sludge hyidrocracking were observed at 400^oC, 2cm³/min of hydrogen flow rate and 1,00 gr of catalyst.