The effects of silver (Ag) nanoparticles (NPs) on activated sludge in a biological nitrogen removal (BNR) process were investigated under aerobic and anoxic conditions. We show that nitrification was more vulnerable to Ag NPs exposure than denitrification at the same Ag NPs concentration. In continuous operation of the BNR process, a higher inhibitory effect on nitrification was attributed to a smaller size of Ag NPs. About 70–90% of the Ag NPs supplied were embedded in the sludge matrix but 10–30% of the Ag NPs remained in the supernatant. This indicates that significant amounts of Ag NPs could be discharged from wastewater treatment plants and potentially impact on aquatic ecosystems.