A contaminated fluid recovery apparatus includes a sludge removal mechanism having a dirty tank, a conveyor, and a magnetic drum which is arranged in the fluid circulating section. The contaminated fluid recovery apparatus is provided with an overflow tank. The overflow tank has a function to keep a fluid surface of the dirty tank in a position higher than the fluid circulating section and the magnetic drum. The magnetic drum is located horizontally between a lower portion and an upper portion of the conveyor. The conveyor scrapes out chips deposited on a bottom portion of the dirty tank toward an exit section. A scraping member, which is in contact with the magnetic drum, drops sludge attracted to the magnetic drum toward the lower portion of the conveyor.