||The normal biomass level in the conventional activated sludge reactor is generally limited to between 2,000 and 3,000 mg/L due to the oxygen transfer limitation and the need for effective sludge settling in the secondary clarifier. In order to eliminate these two constraints, an exploratory study has been carried out to use hydrogen peroxide as the oxygen source in a non-aerated sludge blanket reactor containing a biomass level of 18,000-52,000 mg/L. The thick sludge blanket can effectively retain most of the produced bio-solids, leaving an effluent with SS levels between 50 and 350 mg/L, which may be polished by settling, micro-straining, or even slow sand filtration for small treatment plants. It has been found that an influent dosing of 800 mg/L H2O2 does not induce any peroxide toxicity. This dosing provides an oxygen supply of 376 mg/L, which can satisfy a theoretical COD removal of 750 mg/L based on a cell yield coefficient of 0.50. Of course, the actual COD removal is somewhat lower because a portion of the oxygen supply is consumed by biomass respiration. In treating a synthetic influent containing a TOC of 300 to 500 mg/L (with a COD/TOC ratio of 2.65) and an HRT of 0.33 to 1.0 hour, the reactor can accept an organic loading of up to 36 kgTOC/m3-day (over 50 times higher than the conventional activated sludge system) with a 50% organic removal efficiency. When the loading rate is reduced to 7.2 kgTOC/m3-day, the efficiency increases to 82%. Actually, the extent of TOC removal is largely dictated by the level of peroxide dosing since in this type of reactor, the biomass level is very high and the organic stabilization rate is not dictated by microbial activities. The capital requirement for such a compact reactor is less than 5% of that for the conventional activated sludge plant since its reactor volume is only 2 to 3% of the aeration tank, and there is no need for blowers or other aeration equipment. The operating cost is higher as 1.0 kg of oxygen supply from peroxide is about HK$12/kgO2, while that from diffuser aeration is only HK$1.5 to HK$2.0/kgO2. Nevertheless, for a small plant with a treatment capacity of 500 m3/day treating an influent COD of 500 mg/L, the daily oxygen required is only 112.5 kg/day (equivalent to a peroxide cost of HKD$1,350/day or HK$2.7/m3) , which can be easily offset by the tremendous capital saving for the plant installation. Keywords: Intensified biological rector; compact technology, aerobic sludge blanket reactor; hydrogen peroxide as oxygen source; low capital treatment.