A new effluent treatment scheme is proposed for treating palm oil mill effluent based on coagulation and anaerobic digestion of coagulated sludge. The effectiveness of anionic (N9901) and cationic (N9907) polyelectrolytes manufactured by NALCO (Malaysia) was evaluated both as coagulant and coagulant aid. The results showed that the anionic and cationic polyelectrolytes were best suited as a coagulant aid, and the cationic polyelectrolyte showed better performance than the anionic polyelectrolyte. For an influent chemical oxygen demand (COD) concentration of 59 700 mg L-1 at an alum dosage of 1700 mg L-1, the residual COD, suspended solid removal, sludge volume and pH were found to be 39 665 mg L-1, 87%, 260 mL L-1 and 6.3, respectively. For the above influent COD and alum dosage with the addition of 2 mg L-1 of cationic polyelectrolyte as coagulant aid, the results were 30 870 mg L-1, 90%, 240 mL L-1 and 6.2, respectively. The sludge resulting from the coagulation process using alum as coagulant and cationic polyelectrolyte as coagulant aid was tested for its digestibility in an anaerobic digester. The quantity of biogas generated per gram of volatile solids (VS) destroyed at a loading rate of 26.7 +/- 0.5 and 35.2 +/- 0.4 g VS L-1 d(-1) was found to be 0.68 and 0.72 L g(-1) VS destroyed. The anaerobic biomass when subjected to varying alum dosage in the coagulated palm oil sludge did not exhibit inhibition as the digester performance was in conformity with the regular treatment process (c) 2006 Society of Chemical Industry.