Preparations of acclimated-denitrifying sludge entrapped in phosphorylated polyvinyl alcohol (PVA) beads were used in the denitrification of wastewater. The effects of pH, temperature, and size and sludge load of biocatalyst beads on the nitrate reduction activity were examined. The operational stability of the immobilized sludge system was studied both in a batch reactor and in a CSTR. A high efficiency of denitrification (over 98%) was achieved stably in continuous operation for at least one month. Immobilization in phosphorylated PVA gel proved to be an effective, inexpensive and mild (high recovery of cell activity) method.