A combination of an acidification reactor and an up-flow staged sludge bed (USSB) reactor was applied for treatment of molasses wastewater containing a large amount of organic compounds and sulfate. The USSB reactor had three gas-solid separators (GSS) along the height of the reactor. The combined system was continuously operated at mesophilic temperature over 400 days. In the acidification reactor, acid formation and sulfate reduction were effectively carried out. The sugars contained in the influent wastewater were mostly acidified into acetate, propionate, and n-butyrate. In addition, 10-30% of influent sulfur was removed from the acidification reactor by means of sulfate reduction followed by stripping of hydrogen sulfide. The USSB achieved a high organic loading rate (OLR) of 30 kgCOD m(-3) day(-1) with 82% COD removal. Vigorous biogas production was observed at a rate of 15 Nm(3) biogas m(-3) reactor day(-1). The produced biogas, including hydrogen sulfide, was removed from the wastewater mostly via the GSS. The GSS provided a moderate superficial biogas flux and low sulfide concentration in the sludge bed, resulting in the prevention of sludge washout and sulfide inhibition of methanogens. By advantages of this feature, the USSB may have been responsible for achieving sufficient retention (approximately 60 gVSS L(-1)) of the granular sludge with high methanogenic activity (0.88 gCOD gVSS(-1) day(-1) for acetate and as high as 2.6 gCOD gVSS(-1) day(-1) for H(2)/CO(2)). Analysis of the microbial community revealed that sugar-degrading acid-forming bacteria proliferated in the sludge of the USSB as well as the acidification reactor at high OLR conditions.