High rate algal ponds (HRAP) with a filamentous algae matrix (FAM) as the predominant species, were operated to evaluate the characteristics of FAM and the basic design parameters for treating polluted rural stream water. The porous and gelatinous FAM was formed like a sponge, which functions to prevent excessive loss of the algae in the effluent and can easily be retrieved from the ponds. The organic fraction of harvested FAM was about 88%, which is suitable for use as fertilizer. The HRAP system using FAM was found to be an effective nutrient removal process not requiring any artificial carbon sources for nitrification. At HRT 4 days, the T-N and T-P removal efficiencies were 85.9% and 65.8%, respectively. When the pH and water temperature were maintained above 9 and 15 degrees C, HRT required for achieving a 70% T-N removal efficiency could be reduced by about 3 days. The oxygen production rate by FAM was calculated as 1.45 mgO2/L/m2. The design surface area of HRAP needed per rural inhabitant was about 2.72 m2.