Acclimated sludge was immobilized by a previously developed phosphorylated polyvinyl alcohol (PVA) gel. The immobilized-cell reactor system was established in a 12-2 continuous aeration vessel with a synthetic municipal wastewater as the Seed substrate. In addition, a method was developed to estimate the biomass concentration of the suspended sludge and the immobilized-cell beads by detecting the microbial cell protein content. The system was operated at a HRT of 2-10 h in which the COD loading rate ranged from 0.855-4.223 g COD l(-1) d(-1). More than 90% of COD removed efficiency was obtained at a COD loading rate lower than 2.0 g COD l(-1) d(-1) accompanied by a total nitrogen removal efficiency at around 45%. The immobilized cell process has yielded highly promising results particularly in terms of maintaining a high biomass concentration to attain high efficiency and reducing production of excess sludge to decrease operation cost. The so-called aerated denitrification occurring inside the gel beads was verified experimentally by measuring the nitrate I eduction activity of gel bends. Microscopic observation revealed that three kinds of bacterial species, i.e., BOD oxidizers, nitrifiers, and denitrifiers, developed a habitat segregation from the peripheral surface into the interior part of the gel bead.