The production and use of nanoparticles (NP) has steadily increased within the last decade; however, knowledge about risks of NP to human health and ecosystems is still scarce. Common knowledge concerning NP effects on freshwater organisms is largely limited to standard short-term (≤48 h) toxicity tests, which lack both NP fate characterization and an understanding of the mechanisms underlying toxicity. Employing slightly longer exposure times (72 to 96 h), we found that suspensions of nanosized (∼100 nm initial mean diameter) titanium dioxide (nTiO₂) led to toxicity in Daphnia magna at nominal concentrations of 3.8 (72-h EC₅₀) and 0.73 mg/L (96-h EC₅₀). However, nTiO₂ disappeared quickly from the ISO-medium water phase, resulting in toxicity levels as low as 0.24 mg/L (96-h EC₅₀) based on measured concentrations. Moreover, we showed that nTiO₂ (∼100 nm) is significantly more toxic than non-nanosized TiO₂ (∼200 nm) prepared from the same stock suspension. Most importantly, we hypothesized a mechanistic chain of events for nTiO₂ toxicity in D. magna that involves the coating of the organism surface with nTiO₂ combined with a molting disruption. Neonate D. magna (≤6 h) exposed to 2 mg/L nTiO₂ exhibited a “biological surface coating” that disappeared within 36 h, during which the first molting was successfully managed by 100% of the exposed organisms. Continued exposure up to 96 h led to a renewed formation of the surface coating and significantly reduced the molting rate to 10%, resulting in 90% mortality. Because coating of aquatic organisms by manmade NP might be ubiquitous in nature, this form of physical NP toxicity might result in widespread negative impacts on environmental health.