Phenol is a common organic pollutant in the aquatic habitats. However, its adverse effects on the composition and diversity of phytoplankton are still poorly understood. Phenol can cause toxic effects to different living organisms even at low concentrations. The present study investigated the effect of phenol on phytoplankton diversity and community structure in samples collected from ten polluted sites. The concentration of phenol in the investigated sites were generally higher than 0.05 mg L−1 which is over the allowable limit. The spatial complexity of the microalgal community was investigated using different alpha (α) diversity measures for the largest microalgal groups (cyanobacteria, Chlorophyta, Bacillariophyta). Distance-based redundancy analysis (dbRDA) indicated that phenol pollution had adverse effects on both phytoplankton diversity and taxonomic structure. Accordingly, the algal pollution index (API) was negatively correlated with richness and diversity of the main phytoplankton groups. The most tolerant species to phenol stress belong to Chlorophyta and cyanobacteria. In addition, the total phytoplankton community was grouped into 19 functional groups (FGs) which associated with the preference of a certain environmental conditions. A laboratory toxicity experiment was also performed to identify the negative effects of short-term exposure to phenol on different microalgal species. Thus, the most sensitive taxa were disappeared in response to the phenol treatment. Overall, this study is valuable in indicating the adverse effects of phenol pollution to the natural phytoplankton community.