This paper describes the species-specific responses recorded from two toxin-producing cyanobacteria Aphanizomenon ovalisporum (Forti) and Cylindrospermopsis raciborskii (Woloszynska) Seenaya and Subba Raju as they approached an overwintering phase in Cobaki Lake (New South Wales, Australia). Each species was examined from samples collected at every metre from a time series of depth profiles and analyzed with respect to growth of specialized cells (heterocytes and akinetes), presence of cylindrospermopsins and the accompanying seasonal dynamics of the water body. Growth and dominance of each species was linked to differing seasonal environmental conditions. Both A. ovalisporum and C. raciborskii produced specialized cells during the bloom. As the water chemistry changed, A. ovalisporum produced akinetes before experiencing a rapid decline in cell numbers. In contrast, C. raciborskii continued to bloom without producing detectable akinetes. Peak C. raciborskii cell concentrations (83,160 cells mL−1) occurred in the late autumn, when surface water temperatures were 19.1 °C, and were accompanied by concentrations of total cylindrospermopsins in the hypolimnion exceeding 100 μg L−1. These toxin concentrations were highly positively correlated with conductivity, soluble iron, bioavailable nutrient species and heterocyte densities. This is the first field study to provide evidence that C. raciborskii, despite being traditionally considered a tropical species, can be highly toxic in cooler waters especially when accompanied by strong stratification involving an anoxic semi-saline hypolimnion. This has serious implications for both water quality management and human health risks in those subtropical climates where C. raciborskii is present.