Nitrate removal from soft groundwater using ethanol as a carbon source in an upflow sludge-blanket reactor containing denitrifying granular sludge was investigated. At a hydraulic retention time of 0.83 h, influent nitrate was increased stepwise from 20 to 145 mg N/l (volumetric loading rates (VLRs), 0.60 to 4.2 g N/l/d, respectively) and sludge was periodically wasted to maintain a sludge bed of about 2/3 the liquid volume. Complete nitrate removal was achieved at influent nitrate concentrations up to 75 mg N/l(2.1g N/l/d). MLSS increased from 20 g/l at a VLR of 0.6 g N/l/d to 51 g/l at a VLR of 1.9 g N/l/d, above which it decreased. VSS increased from 11 g/l to a maximum of 25 g/l at a VLR of 2.1g N/l/d. Settling velocities showed the same trend with maximum values in a VLR range of 1.5 to 2.1 g N/Nd. However, granule size, calcium and magnesium contents of the granular sludge and protein, carbohydrate and nucleic acid contents of extracellular polymers decreased steadily with an increase in VLR throughout the range of testing. Within the VLR range of 0.6 to 2.1g N/l/d, corresponding to complete nitrate removal and efficient sludge retention, the granular sludge had a high calcium content of 24 to 22%, magnesium ranged from only 0.7 to 0.1%, proteins from 3.2 to 1.3%, carbohydrates from 4.2 to 1.4%, and nucleic acids from 0.34 to 0.05% of the sludge dry weight. These results suggest an optimum operational VLR in terms of nitrate removal and sludge retention of about 2 g N/l/d.