A potential drawback of traditional dietary metal toxicity studies is that it is difficult to distinguish between the direct toxicity of the metal and indirect effects caused by altered concentrations of essential nutrients in the metal-contaminated diet. In previous studies it has become clear that this can hamper the study of the real impact of dietary metal exposure and also complicates the analysis of the mechanisms of dietary metal toxicity in filter-feeding freshwater invertebrates like Daphnia magna. This problem has been partly circumvented by the production of liposomes, since these vectors are invulnerable to metal-induced food quality shifts and as such can be applied to study the mechanisms of dietary metal toxicity without the confounding effect of nutritional quality shifts. The aim of current study was to evaluate if there is relevance for dietary Ni toxicity under natural exposures, i.e., when D. magna is exposed to dietary Ni via living algae, and secondly, to quantify how nutritional quality shifts contribute to the toxic effects that are observed when algae are used as contaminated food vectors. For this aim, liposomes were prepared by the hydration of phosphatidylcholine in media containing 0 (control), 10, 50, 100 and 500mgNi/L. The liposome particles were then mixed with uncontaminated green algae in a 1/10 ratio (on a dry wt basis) to make up diets with constant nutrient quality and varying Ni contents (i.e., 1.2μgNi/gdry wt in the control and 18.7, 140.3, 165.0 and 501.6μgNi/gdry wt in the Ni-contaminated diet, respectively). A second food type was prepared on the basis of a 1/10 mixture (on a dry weight basis) of control liposomes and Ni-contaminated algae, representing a diet that differed in Ni content (i.e., 1.2, 26.8, 84.7, 262.3 and 742.7μgNi/gdry wt) and concentrations of essential nutrients (in terms of P and omega 3 poly-unsaturated fatty acids like eicosapentaenoic acid and α-linolenic acid). Both diets were then simultaneously fed to D. magna during a 21-day chronic bioassay, using reproduction, growth, survival, ingestion rate and Ni bioaccumulation as endpoints. Ni delivered by liposomes caused a significant inhibition of reproduction and growth when the metal accumulated to minimum levels of 11.9 and 20.0μgNi/gdry wt after 7 and 14 days, respectively. Using algae as Ni vector, similar effects of dietary Ni exposure occurred when algae had been pre-exposed to concentrations of at least 133μg/L of bioavailable Ni (i.e., Ni2+), which is similar to the reproductive EC50 of waterborne Ni exposure for D. magna (115μgNi2+/L). While this may have some consequences for predicting chronic Ni toxicity in this range of Ni concentrations with the biotic ligand model – which could be further improved by including the dietary toxicity pathway in this model, the occurrence of such high concentrations in the field is very rare. Hence, there seems to be very little environmental relevance for dietary Ni toxicity to D. magna. Finally, besides the direct effects of Ni there was no evidence that nutritional quality shifts could have affected daphnids’ growth, but it is very likely that the impairment of reproduction at toxic exposure levels of Ni was also partly the result of reduced fatty acid levels.