Disposal of sewage sludge is forbidden and agricultural use of stabilized sludge will be banned in 2005 in Switzerland. The sludge has to be dewatered, dried, incinerated and the ashes disposed in landfills. These processes are cost intensive and lead also to the loss of valuable phosphate resources incorporated in the sludge ash. The implementation of processes that could reduce excess sludge production and recycle phosphate is therefore recommended. Partial ozonation of the return sludge of an activated sludge system reduces significantly excess sludge production, improves settling properties of the sludge and reduces bulking and scumming. The solubilized COD will also improve denitrification if the treated sludge is recycled to the anoxic zone. But ozonation will partly inhibit and kill nitrifiers and might therefore lead to a decrease of the effective solid retention time of the nitrifier, which reduces the safety of the nitrification. This paper discusses the effect of ozonation on sludge reduction, the operation stability of nitrification, improvement of denitrification and gives also an energy and cost evaluation.