Palm oil industry is the most important agro-industry in Malaysia, but its by-product-palm oil mill effluent (POME), posed a great threat to water environment. In the past decades, several treatment and disposal methods have been proposed and investigated to solve this problem. A two-stage pilot-scale plant was designed and constructed for POME treatment. Anaerobic digestion and aerobic biodegradation constituted the first biological stage, while ultrafiltration (UF) and reverse osmosis (RO) membrane units were combined as the second membrane separation stage. In the anaerobic expanded granular sludge bed (EGSB) reactor, about 43% organic matter in POME was converted into biogas, and COD reduction efficiency reached 93% and 22% in EGSB and the following aerobic reactor, respectively. With the treatment in the first biological stage, suspended solids and oil also decreased to a low degree. All these alleviated the membrane fouling and prolonged the membrane life. In the membrane process unit, almost all the suspended solids were captured by UF membranes, while RO membrane excluded most of the dissolved solids or inorganic salts from RO permeate. After the whole treatment processes, organic matter in POME expressed by BOD and COD was removed almost thoroughly. Suspended solids and color were not detectable in RO permeate any more, and mineral elements only existed in trace amount (except for K and Na). The high-quality effluent was crystal clear and could be used as the boiler feed water.