The algal-bacterial granular sludge (ABGS) system is emerging as a promising technology for future wastewater treatment. This study assessed the impact of different algae species inoculation on granulation, performance, and microbial communities within ABGS systems. The experimental setup included single-species inoculations (Chlorella sp. (R1), Scenedesmus sp. (R2), and Desmodesmus sp. (R3)) and a mixed-species inoculation strategy (R4). Results revealed that R4 achieved the fastest completed granulation process (15 days) with the largest average granule diameter (772.93 μm) and highest physical strength (2.24 ± 0.26%) in the end of the experiment. The relative abundance of extracellular polymeric substances secreting bacteria of R4 maintained high level in whole operation time. Algae assimilation capacity and the abundance of functional bacteria can also influence removal performance. In mature stage, only the average effluent total nitrogen (3.15 ± 2.87 mg/L), total phosphorus (0.37 ± 0.27 mg/L), chemical oxygen demand (25.25 ± 2.98 mg/L) concentration in R4 was lower than that of Grade I discharge standard of municipal wastewater treatment plants in China. The best inorganic carbon utilization and lipid production ability were observed in R4 and R3, respectively. The choice of inoculated algae species was identified as a key factor for bacterial community dynamics. Overall, above results demonstrated that mixed algae species inoculation can be selected as the optimal algae inoculation strategy due to its excellent granulation, performance, and acceptable carbon utilization and lipid production.