This study investigated the effect of dissolved organic matter (DOM) and particulate organic matter (POM) on the formation process of algal-bacterial granular sludge (ABGS). The results showed that compared with DOM, POM accelerated biomass growth and improved the settling performance of the sludge. However, concerning pollutant removal, ABGS cultured with DOM exhibited high TN and TP removal efficiency. The analysis of extracellular polymeric substances (EPS), indicated that the presence of POM primarily facilitated the production of loosely bound EPS (LB-EPS), whereas the presence of DOM promoted the secretion of tightly bound EPS (TB-EPS). Notably, carbon sources influenced the secretion of different signal molecules. ABGS cultured with POM exhibited higher concentrations of 3-oxo-C8-HSL than that cultivated with DOM, while DOM resulted in the production of more C8-HSL and C6-HSL. Microbial communities analysis revealed that the dominant bacteria in the mature ABGS cultured with different carbon sources were Plasticicumulans, while the predominant algal genus displayed notable diversity. Further investigations into functional genes suggested that the nitrification process (hao) and the denitrification process (nir, nar) were greatly enhanced in the presence of DOM. This study reveals the mechanism of carbon source types and ABGS formation, providing valuable guidance for the treatment of municipal wastewater with high POM proportion.