A new cell immobilization method based on the usage of phosphorylated polyvinyl alcohol (PVA) was developed. PVA was first crosslinked with boric acid for a short time (10 min-2 h) to form a spherical structure, which was followed by solidification of the gel beads by esterification of PVA with phosphate. The short contact time with boric acid prevented severe damage of the microorganisms. Denitrifying sludge entrapped in phosphorylated PVA gel beads was used in denitrification of wastewater. The effects of pH, temperaturee, and sludge load of biocatalyst beads on nitrate reduction activity were examined. The operational stability of the immobilized sludge system was studied both in a batch reactor and in a continuous stirred-tank reactor. The reactors were successfully run for 32 days. A steady denitrification efficiency of more than 99% was achieved in the continuous reactor.