In recent years, several novel processes for N-removal almost without consumption of organic carbon under oxygen-limited conditions have been discovered, which may be a promising option for low-cost N-removal from ammonia-rich wastewater. In this study, a laboratory scale suspended-sludge reactor was continuously operated under low dissolved oxygen concentration. High N-removal efficiency and subsequently degradation of the reactor were observed. Molecular analysis based on a partial-16S rRNA gene library showed that, at the stage of high efficiency, the biomass was composed of Planctomycete-like bacteria (up to 40%) and heterotrophic organisms (approximately 60%) as well as a few ammonia-oxidizing bacteria and at the stage of degradation, the autotrophic ammonia-oxidizing bacteria were dominant (up to 70%) and Planctomycete-like bacteria were no longer found in the sludge. Three specific Planctomycete-16S rRNA-targeted probes were used for fluorescence in situ hybridization (FISH). The results showed that at the high-efficiency stage, Planctomycete-like bacteria, present at approximately 20% of the total bacteria, lay frequently in the middle of flocs, while the heterotrophic bacteria occurred within the outer layers. This work revealed that the change of the microbial populations is the key reason for reactor deterioration, and the heterotrophic bacteria probably play an important role in sustaining the biomass structure of the sludge.