The effect of algal bloom control and water quality improvement using modified local soil/sand induced ecological restoration technology (MLS-IER) was studied in an enclosure in Meiliang Bay in the northern Lake Taihu from October 2010 to September 2011. Lab experiments were used to study the mechanism of long-term water quality improvement including resuspension and internal loads control at water-sediment interfaces. Field monitoring results indicated that, TN, NO₃^--N, NH₄⁺-N, TP and PO₄^3--P were reduced by 66%, 57%, 60%, 93%, 92% and 98%, respectively, 30 min after treatment using MLS; and the average concentrations were reduced by 39.83%, 48.53%, 52.30%, 18.75% and 60.00%, respectively, within the following 11 months compared to the control area. The resuspension experiment showed that the anti-resuspension ability of modified soil and sand increased by a factor of 3 and 5 compared to unmodified soil. The sediment-water incubation experiment showed that algae flocculation followed by capping with MLS remarkably increased the ORP and DO at the sediment-water interface, which reversed the source of sediment-water flux of TP and TN into a sink and remarkably reduced the flux of PO₄^3--P and NH₄⁺-N from sediment to water column. The results suggested that, after nutrients were quickly removed from the water by flocculating the algal blooms, it is possible to physically reduce the resuspension of the algae flocs and chemically block the release of nutrients from the sediment by MLS capping. The sustainable water quality improvement and reduction of algal bloom recruitment can be achieved when the buried algae banks are decomposed and absorbed by the restoration of submerged vegetations in shallow waters, which is triggered by the MLS-IER technology.