Sludge from AMD is difficult to handle and dispose, because of the contained toxic substances, such as arsenic, cadmium, etc. To reduce the sludge, the bacterial oxidation and two step neutralization process was proposed and tested by a bench scale plant. The test was carried out by treating the AMD from the abandoned Horobetsu sulfur mine in Japan, which contains about 300 mg/L ferrous ion and 10 mg/L arsenic with pH 1.8. In this process, ferrous ion is oxidized by bacteria, and the AMD neutralizes to pH 3.5 by calcium carbonate in the first step, and neutralized up to pH 7.0 by carbon hydroxide in the second step. The results of the test include, Fe and As contained sludge was generated at the first step and lower As contained sludge was generated at the second step; the sludge volume was reduced by 30% and the second step's sludge possibly be used as a industrial material. (c) 2007 Elsevier Ltd. All rights reserved.