We investigated the performance of a lighted upflow anaerobic sludge blanket (LUASB) reactor for wastewater treatment and poly-beta-hydroxybutyrate (PHB) production. Phototrophic bacteria were induced from UASB (upflow anaerobic sludge blanket) granules under light conditions (100 mu E.m(-2).s(-1)). The ammonium and phosphate ion removal efficiencies of the LUASB reactor were higher than those of the UASB reactor. The difference in the results from runs under light and dark conditions suggested that the ammonium and phosphate ion removal efficiencies were improved by increasing the amount of phototrophic bacteria in the LUASB reactor. The average production rate of PHB from the biomass in the effluent from the LUASB reactor was 6.6-14.0 mg.l(-1)-reactor.d(-1) using acetate-based media and the average PHB content based on the dry bacterial biomass was 15.1-25.3%, The PHB concentration increased by reincubation of the effluent from the LUASB reactor with sodium acetate under light conditions. The UASB granular sludge can decompose a variety of organic substances and in addition the LUASB method can remove ammonium and phosphate ions. The LUASB method thus appears to be appropriate for wastewater treatment and production of phototrophic bacteria and PHB from various wastewaters.