This paper systematically presents, with the help of flow diagrams, the development of a system dynamics model for an activated sludge plant which is used to treat the waste water biologically under aerobic conditions. Three different physical flows (hydraulic flow, biomass flow and flow of substrate) are considered in the model. The model is simulated with the help of IGRASP. The transient and steady-state behaviour of the growth of biomass, sludge production and the treatment efficiency, and their sensitivity to variations of physical (both environmental and physical) parameters are studied in detail. Strategies for recirculation of activated biomass in the treatment plant are evaluated. At the end, the paper indicates the merit of system dynamics modeling as a tool for conceptualizing relationships, integrating knowledge about separate parts and evaluating control strategies in environmental systems.