Aerobic granular sludge (AGS) is a novel microbial community which allows simultaneous removal of carbon, nitrogen, phosphorus and other pollutants in a single sludge system. AGS is distinct from activated sludge in physical, chemical and microbiological properties and offers compact and cost-effective treatment for removing oxidized and reduced contaminants from wastewater. AGS sequencing batch reactors have shown their utility in the treatment of abattoir, livestock, rubber, landfill leachate, dairy, brewery, textile and other effluents. AGS is extensively researched for wide-spread implementation in sewage treatment plants. However, formation of AGS takes relatively much longer time while treating low-strength wastewaters like sewage. Strategies like increased volumetric flow by means of short cycles and mixing of sewage with industrial wastewaters can promote AGS formation while treating low-strength sewage. This article reviewed the state of research on AGS formation mechanisms, bioremediation capabilities and biotechnological applications of AGS technology in domestic and industrial wastewater treatment.