The presence of antibiotics in treated wastewater and consequently in surface and groundwater resources raises concerns about the formation and spread of antibiotic resistance. Improving the removal of antibiotics during wastewater treatment therefore is a prime objective of environmental engineering. Here we obtained a detailed picture of the fate of sulfonamide antibiotics during activated sludge treatment using a combination of analytical methods. We show that pterin-sulfonamide conjugates, which are formed when sulfonamides interact with their target enzyme to inhibit folic acid synthesis, represent a major biotransformation route for sulfonamides in laboratory batch experiments with activated sludge. The same major conjugates were also present in the effluents of nine Swiss wastewater treatment plants. The demonstration of this biotransformation route, which is related to bacterial growth, helps explain seemingly contradictory views on optimal conditions for sulfonamide removal. More importantly, since pterin-sulfonamide conjugates show retained antibiotic activity, our findings suggest that risk from exposure to sulfonamide antibiotics may be less reduced during wastewater treatment than previously assumed. Our results thus further emphasize the inadequacy of focusing on parent compound removal and the importance of investigating biotransformation pathways and removal of bioactivity to properly assess contaminant removal in both engineered and natural systems.