The application of modified clay (MC) to mitigate harmful algal blooms (HABs) is becoming a widespread practice in China because of its low cost, high efficiency and environmental friendliness. Due to its success in China, this technology has also gained international recognition in recent years. Nevertheless, the eco-environmental impacts of this technology still remain to be a concern to many customers and government agencies, which has motivated scientists in both China and many other countries to evaluate its potential effects on nontarget aquatic organisms, water quality and the benthic environment. This paper reviews the results from these studies both in the laboratory and in the field, which showed that MC does not harm nontarget aquatic organisms and has no negative impact on water quality or the benthic environment. Additionally, findings show that MC can alter nutrient cycling and reduce algal toxins in water bodies. Furthermore, researchers also found that MC affects cyst formation and germination in sedimentary environments. This review is expected to provide scientific guidance for mitigating HABs in China and worldwide using clay or MC.