Chain elongation is an open-culture biotechnological process which converts short chain fatty acids andan electron donor to medium chain fatty acids (MCFAs). With this letter we present the first observation ofgranular sludge formation in a chain elongation process. This discovery was made in a continuously stirredanaerobic reactor producing caproate (10.8 g L−1d−1) and heptanoate (1.8 g L−1d−1) as main MCFAs.Concurrently granular and suspended sludge were shaped and attributed to 85% and 15% respectively ofthe total sludge. Both sludge types showed equal product distributions and contributed similarly to MCFAproduction. Granules had irregular shapes, diameters up to ∼1.5 mm, settling velocities of 4–36 m h−1and contained micro-organisms with various shapes. The in-situ settler retained sludge in the bioreactorresulting in a SRT of 4.7 days at an HRT of 17 h. Granular sludge based chain elongation can be optimisedas a high rate biotechnological process.