Achieving stable wastewater treatment performance of algal−bacterial granular sludge (ABGS) remains challenging under low-carbon conditions. Iron plays a pivotal role in enhancing microbial metabolism under low carbon conditions. Herein, zerovalent iron (ZVI) was applied to expedite the granulation process and enhance the sludge stability and nutrient removal of the ABGS system. ZVI served as a carrier facilitating the adhesion of algae and bacteria, subsequently stimulating the secretion of extracellular polymeric substance (EPS) to expedite microbial aggregation, ultimately augmenting the granular size, sludge density, and settleability of ABGS. Moreover, ZVI suppressed the growth of filamentous bacteria (e.g., Neomegalonema) and phototrophs (e.g., Cyanobacteria), which was essential for maintaining ABGS stability during long-term operation. Compared to the aerobic granular sludge (AGS) and ABGS systems, the nitrogen and phosphorus removal efficiencies of ZVI-enhanced ABGS system were increased by 6.1−20.7 and 18.3−37.4%, respectively, probably due to the selective enrichment of bacteria and microalgae, the up-regulated functional enzymes (e.g., nitrite reductase, polyphosphate kinase), and the enhanced electron transport capacity and energy metabolism. This study aids in understanding the enhancement mechanism behind the improved treatment performance and stability of the ABGS system by ZVI, and provides a novel strategy for rapid development of ABGS under low carbon conditions.