A sediment-type photomicrobial fuel cell (PFC), based on the synergistic interaction between microalgae (Chlorella vulgaris) and electrochemically active bacteria, was developed to remove carbon and nutrients from wastewater, and produce electricity and algal biomass simultaneously. Under illumination, a stable power density of 68 ± 5 mW m−2 and a biomass of 0.56 ± 0.02 g L−1 were generated at an initial algae concentration of 3.5 g L−1. Accordingly, the removal efficiency of organic carbon, nitrogen and phosphorus was 99.6%, 87.6% and 69.8%, respectively. Mass balance analysis suggested the main removal mechanism of nitrogen and phosphorus was the algae biomass uptake (75% and 93%, respectively), while the nitrification and denitrification process contributed to a part of nitrogen removal (22%). In addition, the effect of illumination period on the performance of PFC was investigated. Except notable fluctuation of power generation, carbon and nutrients removal was not significantly affected after changing the light/dark photoperiod from 24 h/0 h to 10 h/14 h. This work represents the first successful attempt to develop an effective bacteria–algae coupled system, capable for extracting energy and removing carbon, nitrogen and phosphorus from wastewater in one-step.