Nitrous oxide (N2O) is emitted from wastewater treatment processes, and is known to be a green house gas contributing to global warming. It is thus important to develop technology that can suppress N2O emission. The effects of sludge retention time (SRT) and dissolved oxygen (DO) on N2O emission in an anoxic-oxic activated sludge system were estimated. Moreover, the microbial community structure in the sludge, which plays an important role in N2O suppression, was clarified based on nitrous oxide reductase (nosZ) gene analysis by molecular biological techniques. The results showed that under low SRT conditions, nitrification efficiency was reduced and the N2O emission rate in the oxic reactors was increased. It was also observed that N2O emission was enhanced under low DO conditions, where the available oxygen is insufficient for nitrification. Moreover, molecular analysis revealed that the clones identified in this study were closely related to Ralstonia eutropha and Paracoccus denitrificans. The fact that the identified sequences are not closely related to known culturable denitrifier nosZ sequences indicates a substantial in situ diversity of denitrifiers contributing to N2O suppression, which are not reflected in the cultivatable fraction of the population. The further application of these new molecular techniques should serve to enhance our knowledge of the microbial community of denitrifying bacteria contributing to N2O suppression in wastewater treatment systems.