A novel upflow anaerobic sludge–forward osmotic membrane bioreactor was developed for simultaneous wastewater treatment, membrane fouling reduction, and nutrient recovery. An upflow anaerobic sludge blanket (UASB) reactor was incorporated into the system, suspending the anaerobic sludge at the bottom of the reactor. A forward osmosis membrane replaced the traditional three-phase separator of the UASB technology. The removals of chemical oxygen demand, PO43−, and NH4+ were all more than 95% with low membrane fouling in this system. Halotolerant Fusibacter, which can ferment organics to acetate, was increased rapidly from 0.1% to 5% in this saline environment. Acetoclastic Methanosaeta was the most dominant prokaryotes and responsible for majority of methane production. Reduction of membrane fouling in this system was verified by the fluorescence excitation-emission matrix spectrophotometry. Furthermore, phosphorus recovery and salinity build-up mitigation were achieved using periodic microfiltration to recover 57–105 mg/L phosphorus from pH 9 to 12.