The effects of recirculating the liquid fraction of the digestate during mesophilic anaerobic co-digestion of steam-exploded Salix and cow manure were investigated in laboratory-scale continuously stirred tank reactors. An average organic loading rate of 2.6 g VS L−1 d−1 and a hydraulic retention time (HRT) of 30 days were employed. Co-digestion of Salix and manure gave better methane yields than digestion of manure alone. Also, a 16% increase in the methane yield was achieved when digestate was recirculated and used instead of water to dilute the feedstock (1:1 dilution ratio). The reactor in which the larger fraction of digestate was recirculated (1:3 dilution ratio) gave the highest methane yields. Ammonia and volatile fatty acids did not reach inhibitory levels, and some potentially inhibitory compounds released during steam explosion (i.e., furfural and 5-hydroxy methyl furfural) were only detected at trace levels throughout the entire study period. However, accumulation of solids, which was more pronounced in the recycling reactors, led to decreased methane yields in those systems after three HRTs. Refraining from the use of fresh water to dilute biomass with a high-solids content and obtaining a final digestate with increased dry matter content might offer important economic benefits in full-scale processes. To ensure long-term stability in such an approach, it would be necessary to optimize separation of the fraction of digestate to be recirculated and also perform proper monitoring to avoid accumulation of solids.