In the twenty-first century, numerous forms of pollution have adversely impacted freshwater and the entire aquatic ecosystem. The higher population density in urban areas also contributes to increased releases of substances and thermal contaminants, significantly stressing the ecosystem of industrial companies. This study aimed to assess the potential pressure of industrial and municipal activities on water quality, radioactivity levels, and biological diversity, focusing on the consequences of radionuclides on periphytic diatom communities. Furthermore, the environmental impact of pollutants will be evaluated to monitor the ecological condition of the Ismailia Canal. Chemical analyses employed various instruments and methods to identify and quantify matter, with radionuclide elements measured by gamma spectrometry and diatoms counted and identified by inverted microscopy. Our results revealed that the canal was classified as excellent for irrigation, aquatic life, and drinking water based on FAO, CCME, and EWQS water quality indices, with high nutrient levels at Abu Za’baal fertilizer company. The activity concentration of 226Ra-series, 232Th-series, and 40K in the water and sediment samples for two seasons was within the guideline values, except for a few stations in the zone [B] (the industrial zone). Fertilizer samples (raw material) showed a high value of the 226Ra-series activity. Diatom community structure significantly varied across the different canal locations regarding the presence or absence of industrial activities, with no discernible variations between the study seasons. A specific variety of algal species was found to be predominant at the highest radioactive sites. Redundancy analysis (RDA) showed a significant correlation between parameters (pH, Na, TDS, PO4, SO4, SiO2, K, and CO3), radionuclides, environmental conditions, and the composition of the diatom community, especially in the area affected by industrial discharges. Moreover, the radiological hazard index in water and sediment remained below the maximum for two seasons. This research provides valuable data and information for communities and decision-makers, suggesting the strategic use of phycoremediation as a water biotreatment process to protect the valuable economic resources of the Ismailia Canal.