Water is the lifeblood of everything on earth, nourishing and nurturing all forms of life, while also contributing to the development of civilization. However, with the rapid development of economic construction, especially the accelerated process of modern industrialization, the pollution of oily sewage is becoming increasingly serious, affecting the ecological balance and human health. The efficient elimination of pollutants in sewage is, therefore, particularly urgent. In this paper, a core-shell microbial reactor (MPFA@CNF-SA-AM) was fabricated by using nanocellulose and sodium alginate (SA) particles embedded with microorganisms as the core and lipophilic and hydrophobic fly ash as the outer shell layer. Compared with that of free microorganisms and cellulose and SA aerogel pellets loading with microorganisms (CNF-SA-AM), which has a degradation efficiency of 60.69 and 82.89%, respectively, the MPFA@CNF-SA-AM possesses a highest degradation efficiency of 90.60% within 240 h. So that this self-floating microbial reactor has selective adsorption properties to achieve oil-water separation in oily wastewater and high effective degradation of organic pollutants with low cost. The adsorption curves of MPFA@CNF-SA-AM for diesel and n-hexadecane were studied. The results showed that the adsorption follows the Freundlich model and is a multimolecular layer of physical adsorption. In addition, the degradation mechanism of diesel oil was studied by gas chromatography-mass spectrometry. The results showed that diesel oil was selectively adsorbed to the interior of MPFA@CNF-SA-AM, and it was degraded by enzymes in microorganisms into n-hexadecanol, n-hexadecaldehyde, and n-hexadecanoic acid in turn, and finally converted to water and carbon dioxide. Compared with existing oily wastewater treatment methods, this green and pollution-free dual-functional core-shell microbial reactor has the characteristics of easy preparation, high efficiency, flexibility, and large-scale degradation. It provides a new, effective green choice for oily wastewater purification and on-site oil spill accidents.