According to the U.S. Department of Energy and the European Union, tellurium is a critical element needed for energy and defense technology. Thus methods are needed to recover tellurium from waste streams. The objectives of this study was to determine the feasibility of utilizing upflow anaerobic sludge bed (UASB) reactors to convert toxic tellurite (TeIV) oxyanions to non-toxic insoluble elemental tellurium (Te0) nanoparticles (NP) that are amendable to separation from aqueous effluents. The reactors were supplied with ethanol as the electron donating substrate to promote the biological reduction of TeIV. One reactor was additionally amended with the redox mediating flavonoid compound, riboflavin (RF), with the goal of enhancing the bioreduction of TeIV. Its performance was compared to a control reactor lacking RF. The continuous formation of Te0 NPs using the UASB reactors was found to be feasible and remarkably improved by the addition of RF. The presence of this flavonoid was previously shown to enhance the conversion rate of TeIV by approximately 11-fold. In this study, we demonstrated that this was associated with the added benefit of reducing the toxic impact of TeIV towards the methanogenic consortium in the UASB and thus enabled a 4.7-fold higher conversion rate of the chemical oxygen demand. Taken as a whole, this work demonstrates the potential of a methanogenic granular sludge to be applied as a bioreactor technology producing recoverable Te0 NPs in a continuous fashion.