Autotrophic nitrifiers and heterotrophic bacteria are all oxygen-consuming bacteria. In conventional active sludge, nitrification activities decrease dramatically with increasing COD and ammonia loading rate, as the presence of a large amount of carbonaceous substrates often prevents oxygen being used for nitrification, or high concentration ammonia can harm the metabolism of nitrifiers, which has a relative slow growth rate. In our study, PEG immobilized activated sludge can not only maintain high nitrification rate at high ammonia (more than 500 mg/L) and COD loading rate, but also simultaneously remove ammonia and COD. Experiments demonstrated that nitrifiers and heterotrophic bacteria can coexist in the PEG matrix and reactor to function normally. However, no obvious denitrification phenomena could be observed. Various operational conditions, such as DO, COD and ammonia loading rate, are investigated to study the reaction mechanism and nitrification characteristics of the immobilized activated sludge. The structure of the PEG gel is also discussed.