During the production of manufactured sand, a large amount of stone powder was sieved and buried, leading to resource waste and environmental pollution. To improve the utilization rate of manufactured sand stone powder, this study explores the high-value application of waste stone powder in concrete. By treating the stone powder in manufactured sand as a cementitious component to partially replace cement, the effects of granite stone powder on the microstructural evolution of hardened cement paste were investigated using XRD, TG, SEM, and other characterization methods, leading to the identification of the optimal cement replacement range. Furthermore, by adjusting the stone powder content in manufactured sand, coarse aggregate gradation, sand ratio, and water-to-binder ratio, the workability and mechanical properties of concrete were optimized. The study reveals the mechanism by which paste volume fraction influences concrete’s workability and mechanical performance, and successfully produced low-cost concrete with acceptable workability and mechanical strength using manufactured sand with a high stone powder content. The results show that cement paste with 10% stone powder retained a denser microstructure, as the amount of hydration products showed negligible reduction compared to that of pure cement paste after 7-day and 28-day curing. However, when the substitution of cement with stone powder exceeded 20%, the amount of hydration products decreased significantly by more than 20%, leading to a porous microstructure and lower compressive strength compared to that of pure cement paste. When manufactured sand (MS) with high stone powder content is used in concrete production, the dosage of superplasticizer needs to be increased slightly under the same slump requirement. Additionally, the optimal workability and mechanical properties of MS concrete were achieved when the volume fraction of paste lay in the range of 31~32%. Consequently, C30, C40, and C50 concretes meeting target property requirements were prepared using MS with 15.1%, 16.5%, and 18.7% stone powder content, respectively, resulting in cement consumption reductions of 54, 63, and 92 kg/m³, and thereby significant reductions in cost and carbon emissions.