Reducing CO₂ emission and energy consumption is crucial for the sustainable management of wastewater treatment plants (WWTPs). In this study, an algal-bacterial aerobic granular sludge (AGS) system was developed for efficient carbon (C) assimilation and nitrogen (N)/phosphorus (P) removal without the need for mechanical aeration. The photosynthetic O₂ production by phototrophic organisms maintained the dissolved oxygen (DO) level at 3-4 mg/L in the bulk liquid, and an LED light control system reduced 10–30% of light energy consumption. Results showed that the biomass assimilated 52% of input dissolved total carbon (DTC), and the produced O₂ simultaneously facilitated aerobic nitrification and P uptake with the coexisting phototrophs serving as a C fixer and O₂ supplier. This resulted in a stably high total N removal of 81 ± 7% and an N assimilation rate of 7.55 mg/(g-MLVSS∙d) with enhanced microbial assimilation and simultaneous nitrification/denitrification. Good P removal of 92–98% was maintained during the test period at a molar ∆P/∆C ratio of 0.36 ± 0.03 and high P release and uptake rates of 10.84 ± 0.41 and 7.18 ± 0.24 mg/(g- MLVSS∙h), respectively. Photosynthetic O₂ was more advantageous for N and P removal than mechanical aeration. This proposed system can contribute to a better design and sustainable operation of WWTPs using algal-bacterial AGS.