We report a 40 year record of eutrophication and hypoxia on an estuarine ecosystem and its recovery from hypereutrophication. After decades of high inorganic nutrient concentrations and recurring anoxia and hypoxia, we observe a paradoxical increase in chlorophyll-a concentrations with decreasing nutrient inputs. We hypothesise that algal growth was inhibited due to hypereutrophication, either by elevated ammonium concentrations, severe hypoxia or the production of harmful substances in such a reduced environment. We study the dynamics of a simple but realistic mathematical model, incorporating the assumption of algal growth inhibition. It shows a high algal biomass, net oxygen production equilibrium with low ammonia inputs, and a low algal biomass, net oxygen consumption equilibrium with high ammonia inputs. At intermediate ammonia inputs it displays two alternative stable states. Although not intentional, the numerical output of this model corresponds to observations, giving extra support for assumption of algal growth inhibition. Due to potential algal growth inhibition, the recovery of hypereutrophied systems towards a classical eutrophied state, will need reduction of waste loads below certain thresholds and will be accompanied by large fluctuations in oxygen concentrations. We conclude that also flow-through systems, heavily influenced by external forcings which partly mask internal system dynamics, can display multiple stable states.