As the use of the insensitive munition compound 2,4-dinitroanisole (DNAN) increases, releases to the environment may pose a threat to local ecosystems. Little is known about the environmental fate of DNAN and the conversions caused by microbial activity. We studied DNAN biotransformation rates in sludge under aerobic, microaerophilic, and anaerobic conditions, detected biotransformation products, and elucidated their chemical structures. The biotransformation of DNAN was most rapid under anaerobic conditions with H2 as a cosubstrate. The results showed that the ortho nitro group in DNAN is regioselectively reduced to yield 2-methoxy-5-nitroaniline (MENA), and then the para nitro group is reduced to give 2,4-diaminoanisole (DAAN). Both MENA and DAAN were identified as important metabolites in all redox conditions. Azo and hydrazine dimer derivatives formed from the coupling of DNAN reduction products in anaerobic conditions. Secondary pathways included acetylation and methylation of amine moieties, as well as the stepwise O-demethylation and dehydroxylation of methoxy groups. Seven unique metabolites were identified which enabled elucidation of biotransformation pathways. The results taken as a whole suggest that reductive biotransformation is an important fate of DNAN leading to the formation of aromatic amines as well as azo and hydrazine dimeric metabolites. Biotechnol. Bioeng. 2013; 110: 1595–1604. © 2012 Wiley Periodicals, Inc.