The effects of two seed sludge types, namely conventional activated sludge (CAS) and membrane bioreactor sludge (MBS), on aerobic granulation were investigated. The treatment performances of the reactors were monitored during and after the granulation. Operational period of 37 days was described in three phases; Phase 1 corresponds to Days 1-10, Phase 2 (overloading conditions) to Days 11-27 and Phase 3 (recovery) to Days 28-37. Aerobic granules of 0.56 +/- 0.23 to 2.48 +/- 1.28mm were successfully developed from both MBS and CAS. First granules appeared on Day 9 in both reactors, indicating that there was no difference between two seed sludge types in terms of the time period for granulation initiation. The results revealed that the granules developed from MBS performed better than CAS in terms of settleability, stability, biomass retention, adaptation, protection of granular structure at high loading rates (0.86 gN/L d and 3.92 gCOD/Ld) and low COD/TAN ratio (5). Granules of MBS were also found to be capable of providing better protection for nitrifiers at toxic free-ammonia concentrations (38-46 mg/L NH3-N), thus showing better treatment recovery than those of CAS.