Palm oil mill effluent (POME) with average chemical oxygen demand (COD) and biochemical oxygen demand (BOD) of 70,000 and 30,000 mg/L, respectively, can cause serious environmental hazards if discharged untreated. There are conventional palm oil mill effluent (POME) treatment systems that require large footprint, long HRT and fail to meet the Malaysian Department of Environment (DOE) discharge limit. Hence, the current research is aimed to design a novel integrated anaerobic-aerobic bioreactor (IAAB) for POME treatment in order to overcome these shortcomings of the conventional system. IAAB is a new bioreactor configuration which integrates anaerobic and aerobic digestion in one reactor. The overall removal efficiencies in steady state condition in terms of chemical oxygen demand (COD), biochemical oxygen demand (BOD) and total suspended solids (TSS) were more than 99% at the organic loading rate (OLR) of 10.5 g COD/L day with methane yield of 0.24 LCH4/g COD removed. The effluent quality remained stable (BOD < 70 mg/L) and complied with the discharge limit (BOD < 100 mg/L). Overall, the IAAB system exhibited good stability and pH adjustment was unnecessary. The results show that the IAAB achieves higher performance in terms of organic removal efficiency and methane yield at higher OLR and shorter HRT as compared to the conventional system. Further evaluations of its long-term performance are proposed for the subsequent study. (C) 2011 Elsevier Ltd. All rights reserved.