A mathematical model of continuous growth of microorganisms and product formation with growth inhibition by the product is presented and investigated. Two stable steady states occur due to the competion of growth and product formation for the same limiting substrate. One stable state is characterized by a high product concentration but low biomass concentration whereas the other state is characterized by the opposite relations. The first steady state is approached by oscillating kinetics. Both phenomena are consistent with frequently observed kinetic instabilities in industrial fermentation processes.