The removal of N-compounds in the sequencing batch airlift reactor (SBAR) containing granular sludge was studied under conditions of decreased dissolved oxygen (DO). A simulation model was developed to describe and evaluate the effects of several process conditions in the SBAR on N-removal performance. The model described the experimental data reasonable well. It has, been shown that nitrification, denitrification, and removal of chemical oxygen demand (COD) can occur simultaneously in a granular sludge SBR. It has also been shown that the exact location of the autotrophic biomass influences the net N-removal. The distribution of the autotrophic biomass is influenced by the DO in the reactor. The optimal DO value is expected to be around 40% air saturation. It was shown that storage and subsequent degradation of poly-beta -hydroxybutyrate (PHB) benefit the denitrification. In particular, PHB is stored in bacteria situated in deeper layers of the granules below where the autotrophic activity occurs, serves as a C-source for denitrification,