Microbial granules cultivated in an aerobic bubble column sequencing batch reactor were used for reduction of Pd(II) and formation of biomass associated Pd(0) nanoparticles (Bio Pd) for reductive transformation of organic and inorganic contaminants. Addition of Pd(II) to microbial granules incubated under fermentative conditions resulted in rapid formation of Bio-Pd. The reduction of soluble Pd(II) to biomass associated Pd(0) was predominantly mediated by H2 produced through fermentation. X-ray diffraction and scanning electron microscope analysis revealed that the produced Pd nanoparticles were associated with the microbial granules. The catalytic activity of Bio-Pd was determined using p nitrophenol and Cr(VI) as model compounds. Reductive transformation of p-nitrophenol by Bio-Pd was ~20 times higher in comparison to microbial granules without Pd. Complete reduction of up to 0.25 mM of Cr(VI) by Bio-Pd was achieved in 24 h. Bio-Pd synthesis using selfimmobilized microbial granules is advantageous and obviates the need for nanoparticle encapsulation or use of barrier membranes for retaining Bio-Pd in practical applications. In short, microbial granules offer a dual purpose system for Bio-Pd production and retention, wherein in situ generated H2 serves as electron donor powering biotransformations.