The effect of simultaneously removing algal blooms from water and reducing the resuspension and nutrient release from the sediment was studied using modified local soil/sand flocculation-capping (MLS-capping) in simulated water-sediment systems. Twenty one sediment cores in situ with overlying water containing algal blooms were collected from Meiliang Bay of Lake Taihu (China) in July 2011. The algal cells in the water were flocculated and sunk to the sediment using chitosan modified local soils, and the algal flocs were capped with modified and nonmodified soil/sand and then incubated at 25 °C for 20 days. In the MLS-capping treated systems, the TP concentration was reduced from 2.56 mg P L–1 to 0.06–0.14 mg P L–1 and TN from 14.66 mg N L–1 to 6.03–9.56 mg N L–1 throughout the experiment, whereas the sediment to water fluxes of TP, TN, PO4–P, and NH4–N were greatly reduced or reversed and the redox potential remarkably increased compared to the control system. A capping layer of 1 cm chitosan-modified sand decreased the resuspension of the sediment by a factor of 5 compared to the clay/soil/sediment systems and the overlying water kept clear even under constant stirring conditions (200 rpm). The study suggested that by using MLS-capping technology it is possible to quickly reduce the nutrient and turbidity of water by flocculating and capping the algal cells into the sediment, where the resuspension of algal flocs is physically reduced and the diffusion of nutrients from sediment to the overlying water chemically blocked by the MLS capping layers.