Fluid mud, characterized by a bulk density < 1.2 g/cm³, has various adverse environmental effects; furthermore, it can pose challenges for maritime navigation, as fluid mud is an important factor for determining the depth of navigation channels. Notably, the formation of fluid mud by mixing sand and clay is a complex process. Fluid mud typically occurs on the surface of sediment beds in river estuaries; where the confluence of freshwater and saltwater in such regions promotes particle flocculation. The current study is the first to document the occurrence of fluid mud in Lake Taihu, China. The formation mechanisms were investigated through a comprehensive field and laboratory characterization program. The presence of large flocs was confirmed through this program, prompting further investigation into the role of organic matter. The results indicated that polysaccharides played a crucial role in promoting the aggregation of inorganic particles into flocs. In Lake Taihu, cyanobacterial accumulation zones, which are rich in extracellular polymeric substances (EPS), were primarily found in downwind bays, which also served as the sediment deposition areas. Notably, flocs with a size of ~80 µm contributed to the formation of highly loose fluid mud in the region, with the density varying from 1.09 to 1.13 g/cm³. Overall, this study advances the current literature on hydrogeology and sedimentology, particularly with respect to the characterization and formation of fluid mud in lakes.