Anaerobic sludge digestion of olive oil mill effluent (OOME) in upflow Anaerobic Sludge Blanket (UASB) reactors was shown to be unstable as a result of both chemical and biological parameters. The study was complicated by the fact that Chemical Oxygen Demand (GOD) was removed by growth and maintenance of active biomass and by adsorption in and on the sludge. Coloured compounds caused an inhibition effect on the anaerobic digestion of the wastewater. This inhibition, shown at low COD concentrations of diluted COME, was due to accumulation of recalcitrant coloured compounds in the sludge, inducing irreversible inhibition of bacterial growth. Partial decolourization of COME through resin (Duolite XAD 761) treatment reduced the toxic effect.