Methylation of mercury (Hg) to highly toxic methyl Hg (MeHg), a process known to occur when organic matter (OM) decomposition leads to anoxia, is considered a worldwide threat to aquatic ecosystems and human health. We measured temporal and spatial variations in sediment MeHg, total Hg (THg), and major elements in a freshwater lagoon in Sweden polluted with Hg-laden cellulose fibers. Fiber decomposition, confined to a narrow surface layer, resulted in loss of carbon (C), uptake of nitrogen (N), phosphorus (P), and sulfur (S), and increased MeHg levels. Notably, fiber decomposition and subsequent erosion of fiber residues will cause buried contaminants to gradually come closer to the sediment-water interface. At an adjacent site where decomposed fiber accumulated, there was a gain in C and a loss of S when MeHg increased. As evidenced by correlation patterns and vertical chemical profiles, reduced S may have fueled C-fixation and Hg methylation at this site.