Lake Rotorua is a large (area 79 km²), shallow (mean depth 10.8 m), polymictic lake in central North Island, New Zealand. The lake is eutrophic, with a mean external aerial load of 18.5 mg m⁻² d⁻¹ for total nitrogen and 1.2 mg m⁻² d⁻¹ for total phosphorus. Blooms of cyanobacteria and occasional anoxia of bottom waters occur during summer (December–March). We used a vertically resolved water quality model, DYRESM–CAEDYM, to examine the relative importance of internal and external nutrient inputs on water column nutrient concentrations and phytoplankton biomass, with particular emphasis on cyanobacteria. External nutrient loads associated with nine major inflows to the lake and three additional inflows representing smaller geothermal and coldwater flows and residual flows, were represented as inputs to the model. Other forcing inputs to the model included local meteorological data, discharge from the only outflow, the Ohau Channel, and measured rates of sediment nutrient release obtained from benthic chamber deployments which were used to prescribe ranges of sediment nutrient release that were simulated dynamically within the model. Profiles of water column nutrient concentrations, surface chlorophyll a concentrations and continuous temperature and dissolved oxygen measurements were used to validate the model. Simulated water column temperature and soluble reactive phosphorus (SRP) and ammonium (NH4) concentrations closely matched field measurements, and captured the timing and duration of stratification events as well as subsequent changes in bottom water nutrient concentrations. Surface water concentrations of chlorophyll a were also similar between simulated and observed data. Model simulations indicate that reductions in sediment nutrient fluxes would be more effective in reducing cyanobacterial biomass than similar proportional reductions in catchment fluxes, due to the coincidence of large sediment nutrient release events with high cyanobacterial biomass. This finding indicates that only a significant and prolonged reduction in external loads, which in turn reduces internal loads, will ultimately reduce cyanobacterial biomass in Lake Rotorua.