The demand for phenolic compounds has been increasing rapidly, which has intensified the production and usage of phenol at a commercial scale. In some polluted water bodies, phenol has become one of the typical aromatic contaminants. Such water bodies are inescapably influenced by nutrients from human activities, and also suffer from nuisance cyanobacterial blooms. While phenolic pollution threatens water safety and ecological balance, algal cells are ubiquitous and sensitive to pollutants. Therefore, effects of phenolic pollution on interspecific competition between a bloom-forming cyanobacterium and other common alga merit quantitative investigation. In this study, the effects of phenol on Microcystis aeruginosa (M. aeruginosa, a bloom-forming cyanobacterium) and Chlorella pyrenoidosa (C. pyrenoidosa, a ubiquitous green alga) were analyzed in mono- and co-cultures. The two species were exposed to a series of phenol treatments (0, 2, 20, and 200 μg mL−1). Population dynamics were measured by a flow cytometer and analyzed by the Lotka-Volterra model. The results showed that M. aeruginosa was more sensitive to phenol (EC50 = 80.8 ± 0.16 μg mL−1) compared to C. pyrenoidosa (EC50 = 631.4 ± 0.41 μg mL−1) in mono-cultures. M. aeruginosa won in the co-cultures when phenol was below or equal to 20 μg mL−1, while C. pyrenoidosa became the dominant species in the 200 μg mL−1 treatment. Photosynthetic activity was measured by a fluometer. Results showed phenol significantly impacted the photosynthetic activity of M. aeruginosa by inhibiting the acceptor side of its photosystem II (PSII), while such inhibition in C. pyrenoidosa was only observed in the highest phenol treatment (200 μg mL−1). This study provides a better understanding for predicting the succession of algal community structure in water bodies susceptible to phenolic contamination. Moreover, it reveals the mechanism on photosynthetic responses of these two species under phenolic stress.