A cyanobacterial mat colonizing the wall of a qanat was found to be responsible for damages affecting the passage of water through the water supply system in Golestan province, Gorgan city, Iran. A qanat or kariz is a slightly sloping underground aqueduct used to transport water from water wells or aquifers to the surface for irrigation and drinking supply. A cyanobacterial strain was isolated from the mat and grown in BG11 liquid medium. Fragments of 16S rRNA, mcyG and mcyD genes were amplified and sequenced, as well as the 16S-23S internal transcribed spacer (ITS), from which secondary structures were analyzed. The obtained molecular data, together with morphological and physiological observations, were used to describe the new organism. The isolate was related to a morphotype of Nostoc sensu lato group, with similar characteristics of Desmonostoc, after microscopic inspections. The 16S rRNA phylogenetic analysis placed the isolate into the typical cluster of the recently proposed genus Desmonostoc. Morphological analysis revealed distinctive characteristic and secondary structures of 16S–23S rRNA (D1-D1´ and Box-B regions) derived from comparative analysis, which did not match known species of Desmonostoc. These results lead us to propose a novel Desmonostoc species, Desmonostoc alborizicum, which was described and compared with similar taxa. Furthermore, for the first time a potential toxic species of Desmonostoc was isolated from water supply, since the mcyD and mcyG genes of microcystin synthetase (mcy) cluster was successfully sequenced. The presence of the microcystin was confirmed by chemical analyses that also lead to the discovery of numerous other cyanobacterial secondary metabolites. We recognized substantial amounts of the potent microcystin variant microcystin-LR present in cell extracts of the Desmonostoc strain. Our findings contribute to a deeper understanding of diversity, systematics, and occurrence of Desmonostoc genus.