BACKGROUND: Hydrocarbon degradation by algal-bacterial systems has advantages over degradation by conventional heterotrophic systems. However, oily wastewaters often contain co-contaminants that may inhibit the degradation of total petroleum hydrocarbons (TPH), leading to system failure. RESULTS: This paper reports the effect of phenol on treatment of wastewater containing petroleum hydrocarbons, i.e. diesel oil in a lab-scale rotating biological contactor with biofilm consisting predominantly of Burkholderia cepacia and a freshwater algal culture. The effect of phenol loading from 0.11-0.69 g phenol m(-2) d(-1) on diesel degradation was studied with 21 h hydraulic retention time and TPH loading of 27.33 g TPH m(-2) d(-1). With increase in phenol loading, complete removal of phenol was observed. However, TPH removal decreased from 99% to 94% and significant decrease in TCOD removal was observed possibly due to biomass growth in suspension. Presence of algal culture in the biofilm made it feasible to operate the RBC at a high organic loading. The benefits included better immobilization of the bacterial culture, release of oxygen and generation of alkalinity. Lowering in pH due to accumulation of acidic intermediates formed during oil biodegradation was not observed in this study. CONCLUSION: This system can be recommended for treatment of industrial wastewaters containing TPH and phenols, with proper handling of biosolids. (C) 2010 Society of Chemical Industry