Cyanobacterial blooms have major impacts on the ecological integrity and anthropogenic value of freshwater systems. Chrysosporum ovalisporum, a potentially toxic cyanobacteria has been rare in Australian waters until recently when is has bloomed in a number of lake and river systems. The aim of this study was to determine drivers of its growth and growing dominance. We performed regular monitoring of Mannus Lake, a small freshwater reservoir in South-Eastern Australia that has recently undergone extremely dense bloom events. Blooms of the diazotrophic Chrysosporum ovalisporum occurred in both summers of the 19 month study during periods of persistent thermal stratification. Following the C. ovalisporum blooms, non-diazotrophic taxa (Microcystis aeruginosa and Woronichinia sp.) dominated the phytoplankton community under less stratified conditions. Thermal stratification and nitrogen availability appeared to be the primary drivers of changes in cyanobacterial community structure. We propose that the observed transition from C. ovalisporum to M. aeruginosa and/or Woronichinia sp. may be a result of nitrogen limitation in early summer, which combined with persistent thermal stratification led to an ecological advantage for the nitrogen-fixing C. ovalisporum. Mixing events caused the senescence of the C. ovalisporum bloom, likely supplementing the nutrient budget of the lake with atmospherically derived N and alleviating N limitation to non-diazotrophic taxa. Non-diazotrophic cyanobacterial growth then increased, albeit at much lower biovolumes compared to the initial bloom. Overall, the results demonstrate the role of thermal stratification and nutrient cycling in structuring the cyanobacterial community and provide insights into the environmental factors driving the proliferation of the relatively new, potentially toxic cyanobacterium C. ovalisporum in Australian waters.