A novel gas-scrubbing bioreactor based on a downflow hanging sponge (DHS) reactor was developed as a new volatile organic compound (VOC) treatment system. In this study, the effects of varying the space velocity and gas/liquid ratio were investigated to assess the effectiveness of using toluene gas as a model VOC. Under optimal conditions, the toluene removal rate was greater than 80%, and the maximum elimination capacity was observed at approximately 13g-Cm-3h-1. The DHS reactor demonstrated slight pressure loss (20Pa) and a high concentration of suspended solids (up to 30,000mg/L-sponge). Cloning analysis of the 16S rRNA and functional genes of toluene degradation pathways (tmoA, todC, tbmD, xylA, and bssA) revealed that the clones belonging to the toluene-degrading bacterium Pseudomonas putida constituted the predominant species detected at the bottom of the DHS reactor. The toluene-degrading bacteria Pseudoxanthomonas spadix and Pseudomonas sp. were also detected by tmoA- and todC-targeted cloning analyses, respectively. These results demonstrate the potential for the industrial application of this novel DHS reactor for toluene gas treatment.