This is the first report that demonstrates the ability of anaerobic methanogenic granular sludge to reduce Rh(III) to Rh(0). Recovery of rhodium(Rh) during anaerobic incubations under abiotic and biotic condition with different electron donors was studied. H2 and formate reduced Rh(III) to Rh(0) nanoparticles(NPs) in the absence of microorganisms. However, the presence of microorganism was crucial for Rh(III) reduction with ethanol. Results of X-ray powder diffraction (XRD) and transmission electron microscopy (TEM) confirmed the formation of Rh(0) NPs and indicated the localization and morphology of the formed Rh(0) NPs varied with electron donor utilized. Rh(III) reduction with H2 and ethanol obeyed 1st order kinetics. Rh(III) caused a moderate inhibition to methanogenesis. Rh(III) reduction often ceased before coming to completion but this effect is not due to unfavorable thermodynamics. A hypothesis was developed which ascribes the biological reduction of Rh(III) with ethanol as being due to the biological formation of H2 (that subsequently chemically reacts with Rh). The results obtained indicate the potential of utilizing anaerobic granular sludge bioreactor technology as a practical and promising option in Rh(III) recovery.