The study optimized a step-feed anoxic-oxic membrane bioreactor (AO-MBR) with methanol addition, an existing biological nitrogen removal (BNR) process, to improve total nitrogen (TN) removal and to reduce operating costs. Methanol, utilized as an external carbon source, was costly, which led to examining ways to reduce its usage by adjusting the operational parameters and modifying the configuration. The BioWin’s built-in activated sludge model underwent calibration through biokinetic batch experiments and numerical adjustments of stoichiometric and kinetic parameters to create the BNR process model. Dynamic simulations validated the calibrated model. Using the model, a modified configuration with a 20.8% increase in total anoxic volume was proposed. This increased the anoxic hydraulic retention time, improving the denitrification process. The response surface methodology (RSM) was then used to optimize the operating parameters of the modified configuration for maximum TN removal efficiency and minimum operating cost. The optimized parameters found were 0.5 mg/L dissolved oxygen, 45 days of solid retention time, 0:1 methanol distribution ratio, and 1,794.29 L/d methanol, which all enhanced the denitrification process. This resulted in a 16% increase in TN removal efficiency, a 4.12% decrease in operating costs, and an 8.96% reduction in methanol usage.