Sediment destabilization by sediment-reworking organisms is common in coastal aquatic environments, but the potential of bioturbation to inhibit shoreline succession has not been suggested previously. The lugworm Arenicola marina is a widespread and dominant large burrower at European Atlantic shores, and a major source of bioturbation and bioirrigation on the extensive intertidal flats in the Wadden Sea (eastern North Sea). The hypothesis that lugworm activities inhibit the successive development from sandy to muddy sediments in depositional embayments has been tested by a large-scale exclusion field experiment. Changes in sediment properties indicate a progressive clogging of interstices with fine particles and organic matter, resulting in lower sediment permeability in exclusion areas compared to lugworm inhabited control areas. Chlorophyll content in the surface layer was consistently higher in the absence of lugworms. Lack of sub-surface irrigation in the absence of lugworms combined with reduced sediment permeability resulted in increased concentrations of ammonium, phosphate, silicate, and sulphide in the pore-water. Concentrations >100 μM of sulphide gave rise to toxic conditions for macrofauna. The effects of lugworms on sediment characteristics were more conspicuous in fine than in medium sand. It is concluded that A. marina contributes to the maintenance of permeable sand and thereby sustaining suitable conditions for the lugworm population itself. Without this “ecosystem engineer” mud flats would greatly expand at the expense of sand flats in the Wadden Sea.