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The operation of an activated sludge process at a paper mill (AIPM) in Hedera, Israel, was often characterized by disturbances. As part of a research and development project, a study on new biological treatment was initiated. The study included the operation of three pilot units: a. anaerobic treatment by upflow anaerobic sludge blanket (UASB); b. aerobic treatment by two pilot units including activated sludge and membrane bioreactor (MBR), which have been operated in parallel for comparison reasons. The pilot plant working on anaerobic treatment performed COD reduction from 2,365 to 755 mg/L, expressed as average values. Based on the pilot study, a full scale anaerobic treatment system has been erected. During a period of 100 days, after achieving steady state, the MBR system provided steady operation performance, while the activated sludge produced effluent characterized by oscillatory qualities. The following results, based on average values, indicate much lower suspended solids concentrations in the MBR effluent, 2.5 mg/L, as compared to 25 mg/L in the activated sludge. The ability to develop and maintain a concentration of over 11,000 mg/L of mixed liquor volatile suspended solids in the MBR enabled an intensive bioprocess at relatively high cell residence time. This study demonstrates that the anaerobic process, followed by aerobic MBR can provide effluent of high quality which can be considered for economic reuse in the paper mill industry.