A pilot-scale airlift oxidation ditch using bubble diffuser and baffle as aerator was operated in a wastewater treatment plant (WWTP) to investigate its flow characteristic and wastewater treatment performance. Compared with the conventional oxidation ditch process, effective depth and oxygen utilization efficiency of this new process was improved by underwater aeration. Furthermore, it had a reversed velocity distribution, which decreased from the bottom to the top on vertical section. Velocity measurement showed that a velocity over 0.2m/s at the bottom was sufficient to prevent sludge settlement during long term operation. Application of these concepts would save land area and energy consumption by about 25%―50% and 55%, respectively. In this new system, organic biodegradation and nitrification could be well achieved. Denitrification could occur steadily in the straight part by adjusting the airflow rate. An average TN removal rate of 63% was achieved with dissolved oxygen (DO) concentrations between 0.6mg/L and 1.5mg/L. The main pollutants in the effluent could meet the strictest discharge standard (COD<50mg/L, NH―N<5mg/L, and TN<15mg/L) in China now.