Zero-valent iron nanoparticles are used for the degradation of organic compounds and the immobilization of metals and metalloids. The lack of information on the effect of nZVI in freshwater system necessitated the risk assessment of zero-valent iron nanoparticles in lake water environment. The present study deals with the stability and fate of synthesized zero-valent iron nanoparticles in the upper and lower layers of freshwater microcosm system at a concentration of 1000 mg L−1. The study was divided into two different exposure periods: short-term exposure, up to 24 h after the introduction of nanoparticles, and long-term exposure period up to 180 days (4416 h). Aggregation kinetics of nZVI in freshwater microcosm was studied by measuring the mean hydrodynamic size of the nanoparticles with respect to time. A gradual increase in the particle size with time was observed up to 14 h. The algal population and total chlorophyll content declined for the short exposure period, i.e., 2–24 h, while in the case of longer exposure period, i.e., 24 h to 180 days (4416 h), a gradual increase of both the algal population and total chlorophyll was noted. Five different physico-chemical parameters such as pH, temperature, conductivity, salinity, and total dissolved solids were recorded for 180 days (6 calendar months). The study suggested that the nanoscale zero-valent iron did not exhibit significant toxicity at an exposure concentration of 1000 mg L−1 on the resident algal population in the microcosm system over the longer exposure period tested. © 2017, Springer-Verlag GmbH Germany.