Clay dispersal is one of only a few mitigation methods for harmful algal blooms (HABs) ever applied in the field; however, low flocculation efficiency has always been the most significant drawback associated with natural unmodified clays. This review discusses key factors affecting the flocculation efficiency, based on results obtained in studies of the mechanisms underlying interactions between clay particles and HAB organisms. It further elaborates clay surface modification theory and methods for improving removal efficiency of HAB cells, followed by descriptions of various modified clays successfully prepared with removal efficiencies of HAB cells that are up to hundreds of times greater than natural clays and have lower dosing requirements of 4–10 t/km². Presently, modified clays are the most widely used method for the mitigation of HAB in the field in China. This review also evaluates potential ecological effects of modified clay disposal on water quality, typical aquatic organisms, benthic environments, and ecosystems. Both laboratory and field results have demonstrated that modified clays markedly can actually improve water quality after treatment and pose no negative effects on aquatic ecosystems.