With extensive use of metal oxide nanoparticles (NPs) in a variety of applications comes a higher potential of release into aquatic environments. NPs tend to form much larger aggregates in water, which are expected to settle down to the bottom of the water column and possibly get mixed with the sediments. However, little is known about the environmental impacts and biological effects of these aggregated NPs in the sediment column. In this study, we examined the sedimentation of nanoscale ZnO particles (nZnO) in zebrafish culture medium, and assessed the toxicity of settled nZnO aggregates on developing zebrafish embryos and larvae. Given the known dissolution of nZnO particles to release Zn(2+), we also assessed the toxic effect of soluble Zn(2+) in this organism. We demonstrated that within 48 h, micron-sized nZnO aggregates were formed and settled out of the culture medium. These aggregates were found to exert dose-dependent toxicity to zebrafish embryos and larvae, reducing the hatching rate and causing pericardial edema. The observed toxicity of the nZnO aggregates was not likely a result solely of particle dissolution, as soluble Zn(2+) alone caused much less toxicity to zebrafish embryos than nZnO. Instead, the combination of both nZnO and Zn(2+) may contribute to the embryonic toxicity, possibly by increasing reactive oxidative species (ROS) and/or compromising the cellular oxidative stress response. Interestingly, we demonstrated that one type of formulated sediments could mitigate the toxicity of nZnO aggregates, highlighting a possible countermeasure to reduce the adverse impact of nZnO aggregates on the environment.