Light is a fundamental driver of ecosystem dynamics, affecting the rate of photosynthesis and primary production. In spite of its importance, less is known about its community-scale effects on aquatic ecosystems compared with those of nutrient loading. Understanding light limitation is also important for ecosystem management, as human activities have been rapidly altering light availability to aquatic ecosystems. Here we show that decreasing light can paradoxically increase phytoplankton abundance in shallow lakes. Our results, based on field manipulation experiments, field observations, and models, suggest that, under competition for light and nutrients between phytoplankton and submersed macrophytes, alternative stable states are possible under high light supply. In a macrophyte-dominated state, as light decreases phytoplankton density increases, because macrophytes (which effectively compete for nutrients released from the sediment) are more severely affected by light reduction. Our results demonstrate how species interactions with spatial heterogeneity can cause an unexpected outcome in complex ecosystems. An implication of our findings is that partial surface shading for controlling harmful algal bloom may, counterintuitively, increase phytoplankton abundance by decreasing macrophytes. Therefore, to predict how shallow lake ecosystems respond to environmental perturbations, it is essential to consider effects of light on the interactions between pelagic and benthic producers.