This work presents the first success at aerobic granulation in a nitrogen deficient system. Two sequencing batch reactors (SBRs) were used to treat nitrogen deficient (the N-fix system) or nitrogen-sufficient (containing NH4Cl synthetic wastewater (acetic acid as the sole carbon source). Granulation was observed in both systems, with particularly large granules (average diameter: 7 mm) grown in the N-fix system. We propose that the unique morphology of nitrogen-fixing granules is a consequence of the response of oxygen-sensitive diazotrophs to elevated oxygen concentrations. Both the nitrogen-fixing and nitrogen-supplemented systems were shown to be capable of removing all of the influent substrate carbon. Excellent biomass settleability characteristics were obtained, with the N-fix system having a final sludge volume index (SVI) of less than 100 mL g(-1) and its granules having settling velocities of over 1.4 cm s(-1). However, moderately high solids discharges were recorded for both systems, which revealed a potential limitation of granular sludge processes that is not widely discussed in the literature. (C) 2007 Elsevier Ltd. All rights reserved.