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The European beaver Castor fiber is well‐known as an ecosystem engineer that greatly affects landscape structure, biodiversity as well as physical and chemical properties of surface water bodies. Beaver ponds alter surface water bodies by raising water elevation, decreasing flow velocity and altering the morphology of streams or drainage ditches, which can reduce the concentrations of organic carbon (OC) and nutrients (N, P). Recent studies indicated that mercury transforms into hazardous and neurotoxic methylmercury (MeHg) in beaver impoundments by biological processes in anaerobic conditions. However, the knowledge about nutrients and MeHg levels in impounded forest waterbodies is scarce in Lithuania. We aimed to ascertain the alteration in concentrations and stocks of OC, nutrients and MeHg in water and sediments from upstream and downstream, as well as within beaver dams and ponds during the growing seasons of 2016–2018. Results showed higher concentrations of dissolved organic carbon (DOC) and nutrients (P and N) in upstream water samples compared to those of downstream from beaver dams. Meanwhile, in sediments mean stocks of OC, P and N were the highest in the middle part of the ponds and in beaver dams. Moreover, the concentrations and stocks of MeHg in sediments were higher in beaver dams than in any other parts of beaver impoundments (upstream, mid‐pond, pond periphery and downstream). We conclude that dam bottom sediments were rich in OC, N and P, and at the same time, contained toxic MeHg. Therefore, beaver dams could act as a trickle filter by improving water quality, in our case, DOC, N and P leaching, from riparian forests and soils, but may also act as hotspots of mercury methylation. [ABSTRACT FROM AUTHOR]