Panlong River is one of the major rivers flowing into the Dianchi Lake. In this paper, phytoplankton investigation and environmental assessment for the dredged area in Panlong Estuary Section of Dianchi lake in Kunming city was reported. After microscopic identification and counting of 6 water samples(two of them is control plot), the water environment were evaluated by the phytoplankton species and quantity which were assessed by the biological diversity index, including Maglarf, Shanon-Wiener, Simpson diversity index, Pielou index and Berger-Parker dominance index. It’s found that there are mainly 7 species of algae, and among them, Microcystis spp. et al., are the dominant species. So the water is assessed as eutrophication, Heavy sewage. Based on the diversity index analysis, the dredged area sampling sites were relatively higher than the non-dredged areas in biodiversity of phytoplankton. Summarily, the water quality after dredging has been improved to some extent. Phytoplankton biodiversity indicators should be one of the important water environmental assessment methods.