Tanning is one of the oldest industries known by its voluminous wastewater and the use of hugerntype and amount of chemicals. In Ethiopia there are over twenty tanning industries. Most ofrnwhich release their wastes without pretreatment. TWW is known particularly by its highrnorganic load, nitrogenous, sulfide and chromium contents and by its salinity and alkalinity. Inrnthe presence of these toxic substances and saline and alkaline conditions, TWW treatment byrnbiological methods using conventional neutrophilic organisms is hardly efficient. The objectivernof this study was to treat TWW by naturally alkaliphilic sludge obtained from Soda Lake Chiturnwater and sediment using lab-scale anoxic-oxic activated sludge treatment system and tornevaluate the adaptability of the inoculated sludge to the toxic tannery wastes. The efficacy ofrnthe alkaline sludge and performance of the reactors was evaluated by analyzing COD, TN,rnNH4 +, S2-, SO4 2-, NO3 -, Crtot, MLVSS, MLSS and pH of the raw and treated TWW. The systemrnwas operated on continuous basis, but physicochemical data was obtained at specific OLR ofrn1.92gCOD/L/d and 1.64gCOD/L/d at feed 1 and feed 2 respectively. The system was able tornremove 99% S2-, 93%TN and 89% NO3 - at feed 1 and 96% NH4 +, 93% COD and 92% Crtot atrnfeed 2 from raw TWW. The result showed that at relatively high OLR there was slightly betterrnremoval of sulfides, TN and nitrate but higher removal of COD, ammonia and chromium wasrnobserved at comparatively lower OLR. In addition, the treatment process was effective inrnremoving the color and notorious odor of TWW. Among the key factors of the activated sludgernin treating the nitrogenous TWW are denitrifying bacteria. Adaptability of inoculatedrnmicroorganisms to the TWW was evaluated by isolating denitrifying bacteria from therninoculant lake sediment and from the steady state treatment system. Comparativerncharacterizations of these isolates showed that there was little difference in their pH optimarn(9.5-10.5) and range, chromium tolerance (250-2500mg/l) and preferences to energy sources.rnAlso the differences in their cell wall chemistry (