Despite intensive research and management efforts in the past decades, cyanobacterial blooms and their toxins, such as microcystins (MCs), continue to represent a major ecological and health problem in fresh waters throughout the world. Our objective was to compare the efficacy of two commonly used drinking water treatment technologies, chlorination and ozonation, in removing MCs and in reducing tumour promotion-related effects of cyanobacteria, such as inhibition of gap junctional intercellular communication (GJIC) and activation of mitogen activated protein kinases (MAPKs) in a rat liver epithelial stem-like cell line (WB-F344). This combined chemical and bioassay approach demonstrated that ozone effectively removed all MCs from an extract of a globally important bloom-forming cyanobacterium, Microcystis sp. Ozone also significantly reduced the overall tumour promotional potency of the cyanobacterial extract, as indicated by a substantial reduction in the ability of the extract to inhibit GJIC and activate extracellular receptor kinase 1/2 (ERK1/2). Although comparable reduction of total organic carbon was achieved by ozone and chlorine treatment, chlorination was much less effective in removing MCs and reducing the effects on GJIC. Chlorination had a biphasic effect with an observed decrease of extract-induced activation of ERK1/2 at the lower chlorine doses; whereas at high doses of chlorine the by-products of chlorination actually induced the activation of ERK1/2. The extracts induced p38 activation, and chlorination was not effective in reversing this effect, while ozone did reverse this effect, albeit not as much as the activation of ERK1/2. Thus, ozone was effective in reducing the toxicity of cyanobacterial extracts while chlorination was not only lacking efficacy, but at high doses of chlorination further produced by-products that were equally toxic as the untreated samples. Our study indicates the value of using an effect-based approach to assess the efficacy of water treatment systems in removing toxins, and more specifically demonstrates that ozone was more effective at reducing the toxic potential of cyanobacterial-contaminated water.