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Granular sludge aggregates are particular types of biofilms that display significantly different metrics and physical-chemical characteristics than activated sludge flocs. The efficiency of intensified processes using granular sludge relies on the application of selection pressures. Operational conditions are engineered to force microorganisms to form specific intrinsic physiological, phenotypic, and metabolic traits for granulation and high-rate biological removal of nutrients and/or recalcitrant organic matter. Granular sludge and conventional activated sludge share a core microbiome, while the distribution of the underlying populations can significantly differ in relative abundance and localization in the architecture of granules and flocs. Analogous ecological principles of microbial selection apply from activated sludge to granular sludge ecosystems with the essential difference that granules are governed by diffusion limitations through which different redox potentials are created on micrometre scale. Integrating the microbiology dimension together with the physical–chemical features of granules in engineering practice will make a difference at process level, besides offering new opportunities for bioaugmentation of granules in existing infrastructure. With this review article we critically examine the macro-scale factors impacting granulation, the physical-chemical characteristics of granular sludge, and fundamental and applied questions driven by the microbial ecology of granular sludge, to generate useful concepts for process design and evaluation in engineering practice.