Grass seed can be composted with the understanding that some seed may not be heated enough to render it sterile. This may mean problems with unwanted grass in your garden after the compost is laid down. If there is only a small amount of seed, it can be mixed in with a compost pile the way any other material is. A dedicated compost pile may work better if there a lot of seed to be disposed of.
Place a 3-inch layer of dampened carbon materials, such as straw, leaves, newspapers or cardboard in the compost bin. Put a 2-inch layer of grass seed over that. Shovel some finished compost or garden soil onto the grass. Mix the layers well.
Build an identical layer of carbon, grass seed and compost as the first one, and again stir together.
Build identical layers until the compost bin is full.
Inspect the compost in a few days to ensure the pile is heating. If not, dampen a little more and stir together. Inspect the compost again in several days. The temperature should be rising. Wait for a week.
Stir the entire pile, moving outside material to the inside. This ensure that all portions of the pile are heated enough to prevent grass seed from germinating. Ignore any seed that is germinating in the compost.
Check the volume of the compost. If it is reduced by one-third, then stir again, and do this every two weeks for several months. Keep the moisture level high enough so that the mixture continues to be as wet as a damp sponge.
Stop mixing when the compost turns dark and crumbly, with a sweet, earthy smell to it.