Acid mine drainage (AMD) is a global environmental challenge that represents a primary source of contamination of heavy metals in both active and abandoned mining areas. The present study explored the suitability of a carboxymethylcellulose (CMC) hydrogel cross-linked with functionalized magnetite (Fe3O4) nanoparticles, (CMC-Fe3O4), for the removal of heavy metals from AMD-affected stream waters and tested its eco-friendly nature. AMD-affected stream waters, collected in a former mining site located in the Metalliferous Hills ore district (Central Italy), were chosen as a suitable benchmark for validating the CMC-Fe3O4 hydrogel applications. The remediation capability of the CMC-Fe3O4 hydrogel was investigated on solutions of Zn(II) in deionized (DI) water and on samples of AMD-affected stream waters. The CMC-Fe3O4 hydrogel was able to adsorb Zn(II) from DI water solutions as well as to reduce significantly the concentration of Zn and other heavy metals such as Cd, Co, Cu, Ni and Pb, in AMD-affected stream waters. CMC-Fe3O4 hydrogel and treated waters (both Zn-solution and AMD-affected stream waters) were tested for their effects on the freshwater green alga R. subcapitata by using 72-h growth inhibition tests. No effects were observed on the R. subcapitata growth upon exposure to CMC-Fe3O4 hydrogel, suggesting its eco-friendly nature. Moreover, CMC-Fe3O4 hydrogel was able to reduce the toxicity of heavy metals to the green alga, both in DI and AMD-affected stream water. Based on our findings, CMC-Fe3O4 hydrogel could be considered as a valuable tool for an environmentally safe treatment of AMD-affected stream waters.