This study evaluates the inhibitory effect of a yeast strain, Aureobasidium pullulans KKUY0701, isolated from decayed cyanobacterial bloom against harmful cyanobacterium Microcystis aeruginosa and determines the ability of this strain to remove microcystin (MC) toxin from the water. The antialgal activity of this yeast strain was assayed by co-cultivation with M. aeruginosa, diatom, and green algal species. The MC adsorption experiment was conducted in the presence of living and heat-inactivated yeast cells. Both yeast cells and filtrates caused a rapid reduction in the growth of M. aeruginosa, with complete death and cell lysis occurring after 3 days. The yeast strain did not exhibit any inhibitory effect on either green algae or diatoms. Both living and heat-inactivated yeast cells were capable of adsorption of MC on their surfaces. Inactivated yeast exhibited higher adsorption capacity and lower intensity than living yeast for the adsorption of MC toxin. The results of this study suggest that this yeast strain could be employed to selectively reduce cyanobacterial blooms in freshwaters. Moreover, the application of heat-inactivated yeast’s biomass for toxin adsorption gives new possibilities in drinking water treatment plants.