Background. After a drought in February, 1996, all 126 patients in a haemodialysis unit in Caruaru, north-east Brazil, developed signs and symptoms of acute neurotoxicity and subacute hepatotoxicity following the use of water from a lake with massive growth of cyanobacteria (blue-green algae). 60 patients died. Methods. Besides recording clinical details and outcome at follow-up, we arranged laboratory, radiological, and histological investigations on the patients and toxicological studies of serum and haemodialysis water filters. Findings. The acute presentation was with malaise, myalgia and weakness, nausea and vomiting, and tender hepatomegaly, with a range of neurological symptoms from tinnitus, vertigo, headaches, and deafness to blindness and convulsions. Liver injury ranged from abnormal liver-function test results to rapidly progressive and fatal hepatic failure. Biochemical investigations revealed gross hyperbilirubinaemia, abnormal liver enzyme activities, and hypertriglyceridaemia, but there was no evidence of haemolysis or microangiopathy. Histology revealed a novel acute toxic hepatitis with diffuse panlobular hepatocyte necrosis, neutrophil infiltration, canalicular cholestasis, and regenerative multinucleate hepatocytes. Samples of serum, dialysis filters, and water-treatment columns contained microcystins, the highly toxic low-molecular-weight hepatotoxins produced by cyanobacteria. Interpretation. Cyanobacteria present water-borne hazards to health via drinking water and recreational water. Haemodialysis presents an additional high-risk exposure route: when they enter directly into the circulation, microcystins can lead to fatal clinical syndromes ranging from acute neurotoxic illness to subacute liver failure.