Granular sludge formed in upflow anaerobic sludge blanket reactors play an important role in the field of anaerobic treatment due to their engineering advantages over conventional flocculent forms, such as rich microbial diversity, high solid retention time due to its superior settling characteristics, maximizing the microorganisms-to-space ratio, and greater ability to withstand shock loadings or temperature changes. A better understanding of granule characteristics is highly useful and vital for efficient operation of bioreactors. Recently, developments in the characterization of microbial granules have been made with innovative approaches and sophisticated technologies. This article provides an up-to-date review from the past two decades in the understanding of physicochemical and morphological characteristics of granular sludge with regard to granule size, settling velocity, specific gravity, sludge volume index, volatile suspended solids-to-suspended solids ratio, ash content, inorganic chemical content, crystalline structure, molecular functional groups, microbial structure and composition, microbial communities, and methanogenic activity. Addition of external additives such as synthetic and natural polymers and vitamins may enhance the characteristics of granular sludge. Bioaugmentation might be a useful tool for improving the stability and significantly reducing the length of start-up periods. Application of easily degradable cosubstrates such as glucose, sucrose, cellulose, molasses solution, and volatile fatty acids is highly beneficial in treating toxic wastewaters and improving sludge characteristics. Emerging knowledge on such characteristics might exhibit the optimization of microbial granulation as one of the most reliable techniques in anaerobic treatment. Future research directions are also highlighted.