In order to demonstrate the potentials of both bioenergy production and microcystin (MC) biodegradation in methanogenic conditions, the biogas production, process stability and the variation of MC concentration in anaerobic digestion of blue algae from Taihu Lake were studied. A methane yield of 189.89 mL g−1 VS was obtained from the digester, and the average methane concentration in the biogas was 36.72%. During the digestion, the pH value was fairly constant (6.8 to 7.6), and soluble chemical oxygen demand (SCOD) kept at a relatively stable level. The concentration of total volatile fatty acid (VFA) increased significantly in the first 8 days, and then decreased, showing no inhibition on the digestion. The results also showed that the concentration of MC could be significantly reduced from 1220.19 μg L−1 to 35.17 μg L−1 during the methanogenic process, which followed the first order kinetics well. These findings suggest that anaerobic digestion of blue algae can both generate renewable energy biogas and lead to biodegradation of MC, presenting significant potentials for bioremediation of MC and post-treatment of blue algae.