Wastewater treatment technologies requiring large areas may be less feasible in urbanizing regions of developing countries. Therefore, a new technology, named photo-activated sludge (PAS), was investigated to combine the advantages of regular activated sludge systems with those of algae ponds for the removal of ammonium. The PAS consisted of a mixed photo-bioreactor, continuously fed with BG-11 medium, adjusted to 66 mgN-NH4⁺/l. The reactor volume was 2 l, hydraulic retention time was 24 hours, with a depth of 8 cm, and continuous illumination at the water surface was 66 μmol PAR/m²/s (photosynthetically active radiation). Reactor effluent passed through a settler and settled biomass was returned to the reactor. A well settling biomass developed, that contained both algae and nitrifiers. Effluent contained 10 mgN-NH4⁺/L and 51 mgN-NOx⁻/L. Using a simplified model, the specific algae growth rate was estimated at about 0.62 day⁻¹, which was within the expected range. For nitrifiers (ammonia oxidizers), the specific growth rate was 0.11 day⁻¹, which was lower than reported for regular activated sludge. The in-situ photo-oxygenation process by algae contributed 82% of the oxygen input, whereas oxygen diffusion through the mixed surface provided the remaining 18%. The foreseen energy savings that a PAS system could achieve warrant further investigations with real wastewater.