Rare-earth elements (REEs) underpin a host of technologies central to modern society. As novel REE processing technologies are developed, appropriate handling of wastewaters will be important. One option is discharge of wastewaters to municipal water resource recovery facilities (WRRFs), yet little is currently understood about the potential for REEs to affect the performance of biological treatment processes. To evaluate the potential impacts, bench-scale sequencing batch bioreactors containing activated sludge and synthetic wastewater were exposed to increasing concentrations of gadolinium or yttrium salts. Nitrification inhibition with 50 ppm Gd or Y treatment and negative impacts to organic oxidation with 50 ppm Y treatment were observed. Microbiome analyses indicated changes to microbial communities as a function of REE exposure, including decreases in relative abundance of putative nitrifying bacteria. In the reactors, >95% of the added REE was insoluble, and inhibition was observed only when the soluble REE concentrations approached 1 μM. A subsequent experiment demonstrated the recovery of nitrification after cessation of Gd or Y addition. These findings suggest that due to the low solubility of Gd and Y in typical WRRF treatment conditions, high concentrations would be required to produce an inhibitory effect and that inhibition may be transient, with potential recovery after REE exposure.