During toxic Microcystis aeruginosa blooms, large amounts of cells can enter sediment through natural settlement, and coagulation treatment used to control water blooms can enhance the accumulation of cells. However, the current understanding of the fates of these cells and associated microcystins (MCs), as well as the effect of coagulation treatment on these factors, is limited. The results of the present study show that Microcystis aeruginosa cells in sediment were steadily decomposed under experimental conditions, and that they completely disappeared within 28 days. The major MCs released from settled cells were immediately degraded in sediment, and microbial degradation may be the main mechanism involved in this process. Coagulation treatment with PAC (polyaluminium chloride) + sepiolite can efficiently remove Microcystis aeruginosa cells from the water column and prevent their re-invasion. Furthermore, coagulation treatment with PAC + sepiolite had no significant effect on the release and decomposition of MCs and, thus, will not enhance the MCs pollution. However, coagulation treatment can accelerate the nutrient cycle by enhancing the settlement of cells. More attention should be paid to the effect on nutrient cycle when coagulation treatment is used for restoration of aquatic ecosystems.