The overgrowth of Microcystis aeruginosa (M. aeruginosa) often causes serious harm to the surface water environment. In recent years, allelopathic substances extracted from plants have been discovered to have inhibitory effects on algae growth. However, there is a scarcity of current studies on allelopathic extracts from terrestrial Asteraceae plants. This study investigated the inhibitory effect of Artemisia argyi ( A. argyi) aqueous extract on the growth of M. aeruginosa. Gas chromatography-mass spectrometry was utilized to analyze the contents of A. argyi aqueous extracts, and their inhibitory effects and mechanisms were analyzed by measuring a series of indicators in algal cells. Results showed that terpenoids have the highest content in the A. argyi aqueous extract. Algal cells experienced severe oxidative damage and antioxidant reactions under the influence of A. argyi aqueous extracts, resulting in reduced photosynthetic capacity, enhanced membrane permeability, and intracellular fluid outflow. Furthermore, ecotoxicity experiments involving zebrafish and Vallisneria natans as experimental subjects demonstrated that A. argyi aqueous extract has good ecological safety. Therefore, A. argyi aqueous extracts can serve as a novel environmentally friendly algae inhibitor with potential practical applications for algae inhibition purposes.