Continuous laboratory experiments have confirmed that the construction of the USSB reactor was suitable for the combination of several biological wastewater treatment processes and that both anaerobic and denitrifying anoxic granules could be cultivated inside a compact reactor. The anoxic granules were transformed from the anaerobic granules after the shift from anaerobic to anoxic conditions in the upper compartments of the USSB reactor. The denitrification in such a system can be very intensive and efficient because of the high concentration of the sludge in anoxic compartments, and the high activity of the sludge due to a high and stable temperature. The denitrification rate of 62 mg N/l.h (at 35 degrees C) was achieved in spite of COD-limited conditions in the anoxic compartment of the USSB reactor. Maximum specific activity of anoxic granules 47 mg N/g VSS.h (at 35 degrees C, with glucose as substrate) was found in batch tests. The anoxic granules originating from the anaerobic granules have still demonstrated a significant methanogenic activity comparable with the anaerobic granules.