Twenty-one surface sediments collected from seven surroundings areas of Lake Taihu in two different years were analyzed for total mercury (THg) concentrations, physicochemical characteristics and speciation using a sequential extraction method to assess spatial distribution, sources, and potential ecological risk. Surface sediments from Lake Taihu contained elevated levels of Hg in two sampling years with THg levels ranging from 77 to 346 ng/g (mean 145 ng/g) in October 2010 and ranging from 122 to 573 ng/g (mean 266 ng/g) in November 2012, respectively. The mean THg concentrations in all studied surface sediments exhibited an increasing trend over time. The oxidizable fraction (F3) and residual fraction (F4) were the predominant Hg species in sediments, while more mobile Hg phases of acid-soluble fraction (F1) and reducible fraction (F2) made up less than 0.5% THg. Significant relationships were found between total organic carbon (TOC) and THg and geochemical speciation indicating an important role for organic matter in affecting distribution, mobility, and bioavailability of Hg in sediments. As evidenced by Hakanson’s potential risk index the total ecological risk of Hg was low in the entire Lake Taihu in 2010 but considered moderate in Zhushan Bay, West Coast, and Meiliang Bay in 2012. These findings provide conservation managers with information needed to more effectively regulate the environment of Lake Taihu.