In this work we suggest, analyze and test a novel design of nitrogen removal system that utilizes coupled nitrification - denitrification reactions in a mixed culture of immobilized cells. Two practical designs are considered: the technologically -simple pellet with uniform distribution of mixed cultures and the more complex scheme of a core and a shell structure with segregated populations. First, we analyze the reaction-diffusion model of cell growth and substrate consumption in an immobilized commensalystic system. Detaled kinetics, that account for pH-effect within the pellet and self-inhibition of the nitrification and denitrification rates by their substrates, has been employed. Next, we demonstrate the technology by comparing the performance of alginate gel pellets that were seeded either with nitrifiers or with a mixed culture, of nitrifiers and denitrifiers, or with segregated cultures. Measurements of ammonium and nitrate concentrations in parallel sequencing batch reactors demonstrate that while the nitrification rates are similar in the three pellets, there is no build-up of nitrates in the mixed or segragated culture processes; there were no significant differences between the latter two processes.