Selenium (Se(VI)) is environmentally toxic. One of the most popular reducing agents for Se(VI) remediation is zero-valent iron (ZVI). However, most ZVI studies were carried out in water matrices, and the recovery of reduced Se has not been investigated. A water-sediment system constructed using natural sediment was employed here to study in-situ Se remediation and recovery. A combined effect of ZVI and unacclimated microorganisms from natural sediment was found in Se(VI) removal in the water phase with a removal efficiency of 92.7 ± 1.1% within 7 d when 10 mg L−1 Se(VI) was present. Soluble Se(VI) was removed from the water and precipitated to the sediment phase (74.8 ± 0.1%), which was enhanced by the addition of ZVI (83.3 ± 0.3%). The recovery proportion of the immobilized Se was 34.2 ± 0.1% and 92.5 ± 0.2% through wet and dry magnetic separation with 1 g L−1 ZVI added, respectively. The 16 s rRNA sequencing revealed the variations in the microbial communities in response to ZVI and Se, which the magnetic separation could potentially mitigate in the long term. This study provides a novel technique to achieve in-situ Se remediation and recovery by combining ZVI reduction and magnetic separation.