Although global mercury (Hg) emission from chlor-alkali industry is decreasing, the legacy Hg may still have potential risks due to its environmental persistence. The objective of this work is to study the biogeochemical cycling and potential risk of Hg in the Ya-Er Lake, which was heavily contaminated by historical chlor-alkali production. Higher concentrations of total Hg (THg) in Ya-Er Lake water (16.8 ± 8.4 ng L⁻¹) and sediment (547 ± 489 ng g⁻¹) than other lake systems were observed, reflecting serious Hg pollution in this system. Diffusion rates of Hg at sediment-water interface and budget of Hg showed that release of legacy Hg in sediment (accounting for ∼80%) dominated THg in water, and about 80% methylmercury (MeHg) of total was diffused from sediment. Significant correlations between total organic carbon (TOC) derived from aquaculture and THg diffusion and MeHg concentrations in sediment suggest that TOC plays important roles in controlling legacy Hg release and MeHg production. The actual weekly intakes of Hg via consumption of cultured catfish and wild topmouth culter were higher than the established provisional tolerable weekly intake (PTWI) of MeHg. These results indicated that although the nearby chlor-alkali plant has been shut down for three decades, the release of legacy Hg stored in the sediment still adversely affects this ecosystem. Moreover, aquaculture could enhance MeHg production and control MeHg distribution in the polluted aquatic ecosystem, potentially posing a health risk to surrounding inhabitants through consumption of fish.