Green algae bloom is a water ecological anomaly characterized by the abnormal proliferation and formation of porous sponge-like floating aggregates through photosynthesis of dominant species in the green algae phylum. It is a major water ecological problem faced by shallow lakes in cold and arid regions. However, the driving mechanism of in situ generation and interfacial migration of methylmercury by algal blooms lacks systematic research. We conducted a two-year experiments on Wuliangsuhai, a typical shallow lake in the cold and arid region of northern China, to investigate the effects of green algal blooms on in situ mercury methylation and sediment–water interface transport. Firstly, through on-site investigation, it was found that during the outbreak of green algae, the total organic carbon content in the water increased by 165.76% to 288.31%, the mercury content increased by 54.34% to 392.27%, and the methylation rate increased by 63.72% to 419.29%. The DOM components indicate that the outbreak of green algae increased the protein-like components in the water by 192.57% to 222.50%. The results of indoor microcosm experiments showed that the outbreak of green algae increased the mercury methylation rate in water by 240.21% and TOC increased by 370.21%. Both on-site and indoor experiments have shown that active components such as tyrosine and tryptophan are key substances driving the in situ mercury methylation process in water bodies. Following field experiments to monitor the methylmercury content in the gap water at the sediment–water interface during the outbreak of green algae, the results showed that the methylation rate in the interlayer gap water increased over time, with an increase of 58.72% to 326.64%. According to Fick's first law, the calculation of release flux indicates that sediment is a source of methylmercury in water. The outbreak of green algae promotes the migration of methylmercury from interstitial water to overlying water, leading to a significant increase in the methylation rate of water.