The feasibility of the aerobic granulation of activated sludge was investigated in a continuous-flow anaerobic–anoxic–oxic system under gradient-controlled hydraulic loading on the surface of a cyclone separator. Concentrated domestic sewage was used. After 80 days of operation, 80% of activated sludge in the system was in the form of granular sludge with an average particle size of 373 μm. High removal efficiency was achieved for chemical oxygen demand (94.40%), NH4+-N (99.93%), total nitrogen (89.44%), and total phosphorus (96.92%). A batch study revealed that Pseudomonas (1.34%) and Dechloromonas (1.05%) as the main denitrifying phosphorus-accumulating organisms could efficiently remove phosphorus using nitrate as an electron acceptor, which improved the utilization efficiency of carbon sources and achieved simultaneous denitrification and phosphorus removal. Overall, the study demonstrates the feasibility of enhanced denitrification and phosphorus removal in a continuous-flow granular sludge system. The sludge system enables simultaneous nitrogen and phosphorus removal under low carbon-to-nitrogen ratios.