Recently, oily wastewater treatment has become a hot research topic across the world. Among the common methods for oily wastewater treatment, coalescence is one of the most promising technologies because of its high efficiency, easy operation, smaller land coverage, and lower investment and operational costs. In this research, a new type of ceramic filter material was chosen to investigate the effects of some key factors including particle size of coarse-grained materials, temperature, inflow direction and inflow velocity of the reactor. The aim was to explore the optimum operating conditions for coarse-graining. Results of a series of tests showed that the optimum operating conditions were a combination of grain size 1–3 mm, water temperature 35 °C and up-flow velocity 8 m/h, which promised a maximum oil removal efficiency of 93%.