The process of granule formation in upflow anaerobic sludge blanket (UASB) reactors was studied using oligonucleotide hybridization probes. Two laboratory‐scale UASB reactors were inoculated with sieved primary anaerobic digester sludge from a municipal wastewater treatment plant and operated similarly except that reactor G was fed glucose, while reactor GP was fed glucose and propionate. Size measurements of cell aggregates and quantification of different populations of methanogens with membrane hybridization targeting the small‐subunit ribosomal RNA demonstrated that the increase in aggregate size was associated with an increase in the abundance of Methanosaeta concilii in both reactors. In addition, fluorescence in situ hybridization showed that the major cell components of small aggregates collected during the early stages of reactor startup were M. concilii cells. These results indicate that M. concilii filaments act as nuclei for granular development. The increase in aggregate size was greater in reactor GP than in reactor G during the early stages of startup, suggesting that the presence of propionate‐oxidizing syntrophic consortia assisted the formation of granules. The mature granules formed in both reactors exhibited a layered structure with M. concilii dominant in the core, syntrophic consortia adjacent to the core, and filamentous bacteria in the surface layer. The excess of filamentous bacteria caused delay of granulation, which was corrected by increasing shear through an increase of the recycling rate. © 2006 Wiley Periodicals, Inc.