This research compares performances of an anaerobic two-phase reactor system and a conventional single-phase reactor system in treatment of a synthetic dye wastewater. The two-phase reactor setup used four anaerobic reactors based on upflow anaerobic sludge blanket technology as acid reactors and an expanded granular sludge bed (EGSB) reactor as a methane reactor. An anaerobic reactor based on EGSB technology constituted the single-phase reactor setup. The reactors were operated at different hydraulic retention times (HRTs). The acid reactors removed up to 67% of the influent chemical-oxygen demand (COD) and 77% of the influent dye or color. An average of 10-25% acidification was achieved, and acetic acid, propionic acid, and butyric acid were the major volatile fatty acids produced in the acid reactors. The organic loading or the influent dye concentration did not have any significant effect on acid production or its speciation. The two-phase system could be operated at a HRT as low as 7.5 h with at least 90 and 75% removal of COD and color, respectively. The single-phase system could remove only up to 50% of influent COD and color at a HRT of 9 h. The study, which spanned over a period of 450 days, concludes that a two-phase system produces a better quality of effluent in terms of color and COD than a single-phase anaerobic system when operated under similar conditions. However, the COD mass balance on the two-phase system showed a higher percent of unaccounted COD than the single-phase system. © 2010 ASCE.